The main point of investing for the long term is to make money. Better yet, you’d like to see the share price move up more than the market average. But Procter & Gamble Hygiene and Health Care Limited (NSE:PGHH) has fallen short of that second goal, with a share price rise of 78% over five years, which is below the market return. Looking at the last year alone, the stock is up 20%.
With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Procter & Gamble Hygiene and Health Care
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, Procter & Gamble Hygiene and Health Care managed to grow its earnings per share at 13% a year. That makes the EPS growth particularly close to the yearly share price growth of 12%. That suggests that the market sentiment around the company hasn’t changed much over that time. In fact, the share price seems to largely reflect the EPS growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Procter & Gamble Hygiene and Health Care has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and 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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Procter & Gamble Hygiene and Health Care the TSR over the last 5 years was 90%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It’s good to see that Procter & Gamble Hygiene and Health Care has rewarded shareholders with a total shareholder return of 21% in the last twelve months. And that does include the dividend. That’s better than the annualised return of 14% 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. To that end, you should be aware of the 1 warning sign we’ve spotted with Procter & Gamble Hygiene and Health Care .
