PGG Wrightson's (NZSE:PGW) five-year total shareholder returns outpace the underlying earnings growth

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But if you pick the right individual stocks, you could make more -- or less -- than that. The PGG Wrightson Limited (NZSE:PGW) stock price is down 48% over five years, but the total shareholder return is 65% once you include the dividend. And that total return actually beats the market decline of 23%. And it's not just long term holders hurting, because the stock is down 39% in the last year. Furthermore, it's down 24% in about a quarter. That's not much fun for holders. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

With the stock having lost 16% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

View our latest analysis for PGG Wrightson

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 the unfortunate half decade during which the share price slipped, PGG Wrightson actually saw its earnings per share (EPS) improve by 12% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.

Due to the lack of correlation between the EPS growth and the falling share price, it's worth taking a look at other metrics to try to understand the share price movement.

Revenue is actually up 5.3% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Take a more thorough look at PGG Wrightson's financial health with this free report on its balance sheet.

What About The Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between PGG Wrightson's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for PGG Wrightson shareholders, and that cash payout contributed to why its TSR of 65%, over the last 5 years, is better than the share price return.

A Different Perspective

While the broader market lost about 0.8% in the twelve months, PGG Wrightson shareholders did even worse, losing 35%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 11% per year over half a decade. 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. It's always interesting to track share price performance over the longer term. But to understand PGG Wrightson better, we need to consider many other factors. For instance, we've identified 3 warning signs for PGG Wrightson (1 can't be ignored) that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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