It’s worth remembering that when you buy stock in a company, it can go wrong and you can lose money. But the bright side is that if you buy the stock of a quality company at the right price, you can earn well over 100%. for example, Pennymac Financial Services, Inc. (NYSE:PFSI) shares have surged 153% over the past five years. Most people will be very happy with it. What’s more, the stock is up 25% in about a quarter.
The stock added $121 million to its market cap in the past week alone, so let’s see if underlying performance is driving long-term returns.
Read the latest analysis from PennyMac Financial Services.
The efficient market hypothesis continues to be taught by some, but it has been proven that markets are overly reactive dynamic systems and investors are not always rational. By comparing earnings per share (EPS) and stock price over time, you can get a sense of how investor attitudes toward companies have changed over time.
PennyMac Financial Services has successfully delivered 35% annual earnings per share growth over five years. The EPS growth is more impressive than the 20% annual increase in stock prices over the same period. So the market doesn’t seem so enthusiastic about stocks these days. The fairly low P/E ratio of 4.82 also suggests market concerns.
Here’s how the EPS changed over time (click the image to see the exact values).
We know PennyMac Financial Services has improved its bottom line over the past three years, but what about the future? It might be worth taking a look at us freedom Report how your financial situation has changed over time.
Dividend
It is important to consider total shareholder return and share price return for a particular stock. The stock return reflects only the change in stock price, while the TSR includes the value of the dividend (assuming it has been reinvested) and discounted capital raising or spin-off earnings. As such, for companies that pay large dividends, the TSR is often much higher than the stock price return. For PennyMac Financial Services, TSR over the last five years is 170%. This outperforms the aforementioned stock return. And there are no prizes to speculate that dividend payouts account for the difference primarily!
another point of view
The 14% drop in PennyMac Financial Services’ share price for the year is admittedly disappointing, but not as bad as the market’s 20% drop. Long-term investors shouldn’t be too upset, as they’ve made 22% returns each year over five years. The business may only be facing short-term problems, but shareholders should pay attention to the fundamentals. While it’s worth considering the various effects market conditions have on stock prices, there are other factors that are even more important. for example, Two Warning Signs for PennyMac Financial Services (1 makes us a bit uncomfortable) Good to know.
If you like buying stocks with management, you might like this one freedom company list. (Hint: Insiders are buying).
Please note that the market returns quoted in this article reflect market-weighted average returns for stocks currently traded on US exchanges.
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This article by Simply Wall St is general in nature. We provide comments based on historical data and analyst projections using only unbiased methodologies and our articles are not intended as financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. We aim to deliver long-term focused analysis based on fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Is not …
