Yahoo Finance Can You Imagine How Papa John's International's (NASDAQ:PZZA) Shareholders Feel About The 99% Share Price Increase?
One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, the Papa John's International, Inc. (NASDAQ:PZZA) share price is up 99% in the last three years, clearly besting the market return of around 51% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 21% , including dividends .
View our latest analysis for Papa John's International
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
During the three years of share price growth, Papa John's International actually saw its earnings per share (EPS) drop 9.1% per year.
Thus, it seems unlikely that the market is focussed on EPS growth at the moment. Therefore, we think it's worth considering other metrics as well.
The modest 0.8% dividend yield is unlikely to be propping up the share price. We severely doubt anyone is particularly impressed with the modest 1.6% three-year revenue growth rate. While we don't have an obvious theory to explain the share price rise, a closer look at the data might be enlightening.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Papa John's International is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
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. As it happens, Papa John's International's TSR for the last 3 years was 107%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Papa John's International shareholders are up 21% for the year (even including dividends). But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 11% per year over five year. It is possible that returns will improve along with the business fundamentals. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Papa John's International has 2 warning signs we think you should be aware of.
We will like Papa John's International better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.
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