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Investing in PSG Financial Services (JSE:KST) five years ago would have delivered a 77% gain
Generally speaking, the goal of active stock selection is to find companies that provide returns that are higher than the market average. And in our experience, buying the right shares can give your wealth a significant boost. To wit, the PSG Financial Services share price has risen 55% in five years, easily beating the market return of 7.5% (ignoring dividends). On the other hand, the most recent gains were not that impressive, with shareholders only gaining 34%, including dividends.
Now it’s worth taking a look at the company’s fundamentals too, because this will help us determine whether the long-term shareholder returns have matched the performance of the underlying business.
See our latest analysis for PSG Financial Services
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, PSG Financial Services managed to increase its earnings per share by 12% per year. This EPS growth is higher than the 9% average annual increase in share price. It seems like the market isn’t as enthusiastic about the stock these days.
You can see how EPS has changed over time below (discover the exact values by clicking on the image).
earnings per share growth
We know that PSG Financial Services has improved its results lately, but will it increase revenue? Could you check this free report showing analyst revenue forecasts.
What about dividends?
When analyzing investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming 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 of dividend-paying stocks. We note that for PSG Financial Services the TSR over the last 5 years was 77%, which is better than the share price return mentioned above. The dividends paid by the company thus boosted the total return for shareholders.
A different perspective
It’s good to see that PSG Financial Services has rewarded shareholders with a total shareholder return of 34% in the last twelve months. And that includes the dividend. This gain is better than the five-year annual TSR, which is 12%. So it seems like sentiment around the company has been positive lately. Someone with an optimistic outlook could see the recent improvement in TSR as an indication that the business itself is improving over time. If you would like to research PSG Financial Services in more detail then you may want to check whether insiders are buying or selling shares in the company.
The story continues
If you are like me, then you will no I want to lose this free list of undervalued small caps that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks currently trading on South African exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only 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 into account your objectives or financial situation. Our goal is to bring you long-term focused analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St has no position in any of the stocks mentioned.