If you buy and hold a stock for many years, you'd hope to be making a profit. But more than that, you probably want to see it rise more than the market average. But Millennium & Copthorne Hotels New Zealand Limited (NZSE:MCK) has fallen short of that second goal, with a share price rise of 41% over five years, which is below the market return. Over the last twelve months the stock price has risen a very respectable 13%.
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 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).
Over half a decade, Millennium & Copthorne Hotels New Zealand managed to grow its earnings per share at 16% a year. This EPS growth is higher than the 7% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 7.78 also suggests market apprehension.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Millennium & Copthorne Hotels New Zealand's key metrics by checking this interactive graph of Millennium & Copthorne Hotels New Zealand's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Millennium & Copthorne Hotels New Zealand's total shareholder return (TSR) and its share price return. 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. Dividends have been really beneficial for Millennium & Copthorne Hotels New Zealand shareholders, and that cash payout contributed to why its TSR of 63%, over the last 5 years, is better than the share price return.
A Different Perspective
Millennium & Copthorne Hotels New Zealand provided a TSR of 19% over the last twelve months. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 10% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. Before forming an opinion on Millennium & Copthorne Hotels New Zealand you might want to consider these 3 valuation metrics.
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 NZ exchanges.
When trading Millennium & Copthorne Hotels New Zealand or any other investment, use the platform considered by many to be the Professional's Gateway to the Worlds Market, Interactive Brokers. You get the lowest-cost* trading on stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted
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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.