Procter & Gamble Hygiene and Health Care (NSE:PGHH) sheds 4.6% this week, as yearly returns fall more in line with earnings growth

While Procter & Gamble Hygiene and Health Care Limited (NSE:PGHH) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 13% in the last quarter. But the silver lining is the stock is up over five years. In that time, it is up 22%, which isn't bad, but is below the market return of 150%. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 17% decline over the last twelve months.

In light of the stock dropping 4.6% 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 Procter & Gamble Hygiene and Health Care

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 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 five years of share price growth, Procter & Gamble Hygiene and Health Care achieved compound earnings per share (EPS) growth of 10% per year. The EPS growth is more impressive than the yearly share price gain of 4% over the same period. So it seems the market isn't so enthusiastic about the stock these days. Having said that, the market is still optimistic, given the P/E ratio of 67.80.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

This free interactive report on Procter & Gamble Hygiene and Health Care's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Procter & Gamble Hygiene and Health Care, it has a TSR of 31% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 6.4% in the last year, Procter & Gamble Hygiene and Health Care shareholders lost 16% (even including dividends). 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 6%, 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. For instance, we've identified 1 warning sign for Procter & Gamble Hygiene and Health Care that you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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