Advertisement
Australia markets closed
  • ALL ORDS

    8,153.70
    +80.10 (+0.99%)
     
  • ASX 200

    7,896.90
    +77.30 (+0.99%)
     
  • AUD/USD

    0.6514
    -0.0021 (-0.33%)
     
  • OIL

    82.37
    +1.02 (+1.25%)
     
  • GOLD

    2,227.40
    +14.70 (+0.66%)
     
  • Bitcoin AUD

    108,954.48
    +1,738.27 (+1.62%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • AUD/EUR

    0.6026
    -0.0004 (-0.07%)
     
  • AUD/NZD

    1.0898
    +0.0018 (+0.17%)
     
  • NZX 50

    12,105.29
    +94.63 (+0.79%)
     
  • NASDAQ

    18,265.39
    -15.46 (-0.08%)
     
  • FTSE

    7,963.33
    +31.35 (+0.40%)
     
  • Dow Jones

    39,741.77
    -18.31 (-0.05%)
     
  • DAX

    18,492.40
    +15.31 (+0.08%)
     
  • Hang Seng

    16,541.42
    +148.58 (+0.91%)
     
  • NIKKEI 225

    40,168.07
    -594.66 (-1.46%)
     

The Pro-Pac Packaging (ASX:PPG) Share Price Is Up 65% And Shareholders Are Holding On

If you want to compound wealth in the stock market, you can do so by buying an index fund. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the Pro-Pac Packaging Limited (ASX:PPG) share price is up 65% in the last year, clearly besting the market decline of around 1.6% (not including dividends). So that should have shareholders smiling. In contrast, the longer term returns are negative, since the share price is 55% lower than it was three years ago.

See our latest analysis for Pro-Pac Packaging

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.

Pro-Pac Packaging went from making a loss to reporting a profit, in the last year.

ADVERTISEMENT

The result looks like a strong improvement to us, so we're not surprised the market likes the growth. Generally speaking the profitability inflection point is a great time to research a company closely, lest you miss an opportunity to profit.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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

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. This free interactive report on Pro-Pac Packaging's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Pro-Pac Packaging the TSR over the last year was 70%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that Pro-Pac Packaging shareholders have received a total shareholder return of 70% over the last year. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 7% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand Pro-Pac Packaging better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Pro-Pac Packaging you should be aware of, and 1 of them is potentially serious.

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.

This article by Simply Wall St is general in nature. 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.

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