Porvair's (LON:PRV) earnings growth rate lags the 4.2% CAGR delivered to shareholders

Porvair plc (LON:PRV) shareholders might be concerned after seeing the share price drop 15% in the last quarter. But at least the stock is up over the last five years. Unfortunately its return of 18% is below the market return of 20%.

In light of the stock dropping 11% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

View our latest analysis for Porvair

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

During five years of share price growth, Porvair achieved compound earnings per share (EPS) growth of 9.9% per year. This EPS growth is higher than the 3% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Porvair has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Porvair the TSR over the last 5 years was 23%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Porvair provided a TSR of 3.2% over the last twelve months. But that was short of the market average. On the bright side, the longer term returns (running at about 4% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.