Those who invested in PICC Property and Casualty (HKG:2328) three years ago are up 134%

One simple way to benefit from the stock market is to buy an index fund. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, PICC Property and Casualty Company Limited (HKG:2328) shareholders have seen the share price rise 93% over three years, well in excess of the market decline (9.6%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 48%, including dividends.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for PICC Property and Casualty

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the three years of share price growth, PICC Property and Casualty actually saw its earnings per share (EPS) drop 1.9% per year.

Given the share price resilience, we don't think the (declining) EPS numbers are a good measure of how the business is moving forward, right now. So other metrics may hold the key to understanding what is influencing investors.

Interestingly, the dividend has increased over time; so that may have given the share price a boost. It could be that the company is reaching maturity and dividend investors are buying for the yield. On top of that, revenue grew at a rate of 5.7% per year, and it's likely investors interpret that as pointing to a brighter future.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

PICC Property and Casualty is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, PICC Property and Casualty's TSR for the last 3 years was 134%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that PICC Property and Casualty has rewarded shareholders with a total shareholder return of 48% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 12%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand PICC Property and Casualty better, we need to consider many other factors. Even so, be aware that PICC Property and Casualty is showing 1 warning sign in our investment analysis , you should know about...

Of course PICC Property and Casualty may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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