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Premier Investments' (ASX:PMV) earnings growth rate lags the 19% CAGR delivered to shareholders

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Premier Investments Limited (ASX:PMV) shareholders have seen the share price descend 11% over the month. But that doesn't change the fact that shareholders have received really good returns over the last five years. In fact, the share price is 103% higher today. To some, the recent pullback wouldn't be surprising after such a fast rise. Only time will tell if there is still too much optimism currently reflected in the share price.

In light of the stock dropping 7.0% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

Check out our latest analysis for Premier Investments

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, Premier Investments managed to grow its earnings per share at 21% a year. This EPS growth is higher than the 15% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
earnings-per-share-growth

It is of course excellent to see how Premier Investments has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Premier Investments' financial health with this free report on its balance sheet.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Premier Investments' TSR for the last 5 years was 143%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Premier Investments has rewarded shareholders with a total shareholder return of 24% in the last twelve months. That's including the dividend. That gain is better than the annual TSR over five years, which is 19%. Therefore it seems like sentiment around the company has been positive lately. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Premier Investments better, we need to consider many other factors. For example, we've discovered 1 warning sign for Premier Investments that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

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