Did You Miss Growthpoint Properties Australia's (ASX:GOZ) 20% Share Price Gain?

By
Simply Wall St
Published
May 29, 2021
ASX:GOZ
Source: Shutterstock

There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But not every stock you buy will perform as well as the overall market. Over the last year the Growthpoint Properties Australia (ASX:GOZ) share price is up 20%, but that's less than the broader market return. However, the stock hasn't done so well in the longer term, with the stock only up 7.6% in three years.

View our latest analysis for Growthpoint Properties Australia

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over the last twelve months, Growthpoint Properties Australia actually shrank its EPS by 31%.

Given the share price gain, we doubt the market is measuring progress with EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

Absent any improvement, we don't think a thirst for dividends is pushing up the Growthpoint Properties Australia's share price. Rather, we'd posit that the revenue increase of 6.3% might be more meaningful. After all, it's not necessarily a bad thing if a business sacrifices profits today in pursuit of profit tomorrow (metaphorically speaking).

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
ASX:GOZ Earnings and Revenue Growth May 29th 2021

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. This free report showing analyst forecasts should help you form a view on Growthpoint Properties Australia

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Growthpoint Properties Australia, it has a TSR of 27% for the last year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Growthpoint Properties Australia shareholders gained a total return of 27% during the year. Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 10% per year over five year. It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Growthpoint Properties Australia better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Growthpoint Properties Australia (at least 2 which shouldn't be ignored) , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.

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