PNB Gilts (NSE:PNBGILTS) Has Gifted Shareholders With A Fantastic 142% Total Return On Their Investment

Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the PNB Gilts Ltd. (NSE:PNBGILTS) share price is up 80% in the last 5 years, clearly besting the market return of around 65% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 78% , including dividends .

Check out our latest analysis for PNB Gilts

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

Over half a decade, PNB Gilts managed to grow its earnings per share at 43% a year. This EPS growth is higher than the 12% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 1.83.

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

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

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, PNB Gilts' TSR for the last 5 years was 142%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that PNB Gilts has rewarded shareholders with a total shareholder return of 78% in the last twelve months. That's including the dividend. That's better than the annualised return of 19% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. For instance, we've identified 3 warning signs for PNB Gilts (2 are a bit unpleasant) that you should be aware of.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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