Growthpoint Properties Australia (ASX:GOZ) Has Compensated Shareholders With A Respectable 61% Return On Their Investment

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. But Growthpoint Properties Australia (ASX:GOZ) has fallen short of that second goal, with a share price rise of 19% over five years, which is below the market return. Zooming in, the stock is actually down 17% in the last year.

Check out our latest analysis for Growthpoint Properties Australia

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

Growthpoint Properties Australia's earnings per share are down 6.9% per year, despite strong share price performance over five years.

The strong decline in earnings per share suggests the market isn't using EPS to judge the company. Given that EPS is down, but the share price is up, it seems clear the market is focussed on other aspects of the business, at the moment.

In fact, the dividend has increased over time, which is a positive. It could be that the company is reaching maturity and dividend investors are buying for the yield. The revenue growth of about 6.8% per year might also encourage buyers.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Take a more thorough look at Growthpoint Properties Australia's financial health with this free report on its balance sheet.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Growthpoint Properties Australia the TSR over the last 5 years was 61%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Growthpoint Properties Australia shareholders are down 12% for the year (even including dividends), but the market itself is up 3.8%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 10%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Growthpoint Properties Australia is showing 5 warning signs in our investment analysis , and 2 of those are significant...

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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