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In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Picton Property Income Limited (LON:PCTN) shareholders have had that experience, with the share price dropping 32% in three years, versus a market decline of about 11%.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for Picton Property Income
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 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.
Picton Property Income became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. So given the share price is down it's worth checking some other metrics too.
Given the healthiness of the dividend payments, we doubt that they've concerned the market. It's good to see that Picton Property Income has increased its revenue over the last three years. But it's not clear to us why the share price is down. It might be worth diving deeper into the fundamentals, lest an opportunity goes begging.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We know that Picton Property Income has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Picton Property Income in this interactive graph of future profit estimates.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Picton Property Income's TSR for the last 3 years was -22%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Picton Property Income shareholders gained a total return of 4.5% during the year. But that was short of the market average. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 1.8% endured over half a decade. So this might be a sign the business has turned its fortunes around. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Picton Property Income you should be aware of.