Stock Analysis

Can You Imagine How Porvair's (LON:PRV) Shareholders Feel About The 79% Share Price Increase?

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LSE:PRV
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Stock pickers are generally looking for stocks that will outperform the broader market. And in our experience, buying the right stocks can give your wealth a significant boost. To wit, the Porvair share price has climbed 79% in five years, easily topping the market return of 13% (ignoring dividends).

See our latest analysis for Porvair

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, Porvair achieved compound earnings per share (EPS) growth of 3.4% per year. This EPS growth is lower than the 12% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
LSE:PRV Earnings Per Share Growth March 8th 2021

Dive deeper into Porvair's key metrics by checking this interactive graph of Porvair's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Porvair the TSR over the last 5 years was 87%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in Porvair had a tough year, with a total loss of 17% (including dividends), against a market gain of about 20%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 13%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Before spending more time on Porvair it might be wise to click here to see if insiders have been buying or selling shares.

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 GB exchanges.

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