Yahoo Finance Mirvac Group's (ASX:MGR) investors will be pleased with their favorable 69% return over the last five years
Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the Mirvac Group share price has climbed 39% in five years, easily topping the market return of 30% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 14% in the last year , including dividends .
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
View our latest analysis for Mirvac Group
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
During five years of share price growth, Mirvac Group actually saw its EPS drop 3.9% per year.
So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
The revenue reduction of 4.3% per year is not a positive. So it seems one might have to take closer look at earnings and revenue trends to see how they might influence the share price.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think Mirvac Group will earn in the future (free profit forecasts).
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 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, Mirvac Group's TSR for the last 5 years was 69%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Mirvac Group provided a TSR of 14% over the year (including dividends). That's fairly close to the broader market return. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 11%. It is possible that management foresight will bring growth well into the future, even if the share price slows down. 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. For example, we've discovered 2 warning signs for Mirvac Group that you should be aware of before investing here.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.
