20-05-2025
PGG Wrightson (NZSE:PGW) shareholders have endured a 55% loss from investing in the stock three years ago
Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term PGG Wrightson Limited (NZSE:PGW) shareholders. Sadly for them, the share price is down 60% in that time. Shareholders have had an even rougher run lately, with the share price down 13% in the last 90 days.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
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To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 the three years that the share price fell, PGG Wrightson's earnings per share (EPS) dropped by 39% each year. This fall in the EPS is worse than the 26% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into PGG Wrightson's key metrics by checking this interactive graph of PGG Wrightson's earnings, revenue and cash flow.
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, PGG Wrightson's TSR for the last 3 years was -55%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
It's good to see that PGG Wrightson has rewarded shareholders with a total shareholder return of 16% in the last twelve months. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 1.4% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. 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. Case in point: We've spotted 4 warning signs for PGG Wrightson you should be aware of, and 2 of them shouldn't be ignored.
Of course PGG Wrightson may not be the best stock to buy. So you may wish to see this free 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 Zealander exchanges.
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