Yahoo Finance Persimmon (LON:PSN) Has Compensated Shareholders With A Respectable 96% Return On Their Investment
Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Persimmon Plc (LON:PSN) share price is up 46% in the last 5 years, clearly besting the market return of around 13% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 12% , including dividends .
View our latest analysis for Persimmon
There is no denying that markets are sometimes efficient, but prices do not always reflect 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).
Over half a decade, Persimmon managed to grow its earnings per share at 3.3% a year. This EPS growth is lower than the 8% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Persimmon's key metrics by checking this interactive graph of Persimmon's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Persimmon's TSR for the last 5 years was 96%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Persimmon shareholders have received a total shareholder return of 12% over one year. Of course, that includes the dividend. Having said that, the five-year TSR of 14% a year, is even better. 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. Even so, be aware that Persimmon is showing 1 warning sign in our investment analysis , you should know about...
Of course Persimmon 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 GB exchanges.
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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