One easy way to profit from the stock market is to buy index funds. However, if you choose the right individual stocks, you can earn even more.Please take a look Green Cross Health Limited (NZSE:GXH) is up 14% in three years, significantly outpacing the market's 20% decline (not including dividends). On the other hand, recent earnings haven't been very good, with shareholder returns including dividends at just 16%.
It's been a good week for Green Cross Health shareholders, so let's take a look at the long-term fundamental trends.
See our latest analysis for Green Cross Health.
While there is no denying that markets are sometimes efficient, prices do not always reflect underlying company 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 the past three years, Green Cross Health has not been able to grow its earnings per share, with its profits decreasing by 4.2% (annualized).
While EPS is down, stock prices are up, but neither move has been particularly sharp, suggesting the market has been too pessimistic to date. Still, if EPS declines indefinitely, the stock price may follow suit (especially if the company makes a loss).
The image below shows how EPS has changed over time (unveil the exact values by clicking on the image).
Dive deeper into Green Cross Health's key metrics by checking out this interactive graph of Green Cross Health's earnings, revenue and cash flow.
What will happen to the dividend?
When looking at return on investment, it is important to consider the following differences: Total shareholder return (TSR) and stock price return. Whereas the price/earnings ratio 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 much higher than the share price return. We note that Green Cross Health's TSR over the last three years was 65%, which is better than the share price return mentioned above. Therefore, the dividend paid by the company is total Shareholder returns.
different perspective
It's good to see that Green Cross Health returned a total return of 16% to shareholders over the last twelve months. That includes dividends. The stock appears to have performed better of late, as the 1-year TSR is better than his 5-year TSR (the latter coming in at 11% per annum). Optimists might think that the recent improvement in TSR indicates that the business itself is improving over time. It's always interesting to track stock performance over the long term. However, to better understand Green Cross health, many other factors need to be considered. Note that Green Cross Health is still listed. 2 warning signs in investment analysis you should know…
of course Green Cross Health may not be the best stock to buy..So you might want to see this free A collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on New Zealand exchanges.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
