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Passive investing in index funds can generate returns that roughly match the overall market. But the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Precinct Properties New Zealand Limited (NZSE:PCT) share price is 52% higher than it was five years ago, which is more than the market average. We're also happy to report the stock is up a healthy 25% in the last year.
View our latest analysis for Precinct Properties New Zealand
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.
Over half a decade, Precinct Properties New Zealand managed to grow its earnings per share at 4.8% a year. This EPS growth is slower than the share price growth of 8.7% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Precinct Properties New Zealand 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?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, Precinct Properties New Zealand's TSR for the last 5 years was 95%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Precinct Properties New Zealand shareholders have received a total shareholder return of 30% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 14% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Importantly, we haven't analysed Precinct Properties New Zealand's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.