For many, the main point of investing is to generate higher returns than the overall market. But in any portfolio, there will be mixed results between individual stocks. So we wouldn’t blame long term Millennium & Copthorne Hotels New Zealand Limited (NZSE:MCK) shareholders for doubting their decision to hold, with the stock down 33% over a half decade.
So let’s have a look and see if the longer term performance of the company has been in line with the underlying business’ progress.
See our latest analysis for Millennium & Copthorne Hotels New Zealand
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the five years over which the share price declined, Millennium & Copthorne Hotels New Zealand’s earnings per share (EPS) dropped by 39% each year. The share price decline of 8% per year isn’t as bad as the EPS decline. So the market may previously have expected a drop, or else it expects the situation will improve. With a P/E ratio of 74.85, it’s fair to say the market sees a brighter future for the business.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
This free interactive report on Millennium & Copthorne Hotels New Zealand’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Millennium & Copthorne Hotels New Zealand the TSR over the last 5 years was -26%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Millennium & Copthorne Hotels New Zealand shareholders are down 3.6% for the year (even including dividends), but the market itself is up 9.1%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. However, the loss over the last year isn’t as bad as the 5% per annum loss investors have suffered over the last half decade. We’d need to see some sustained improvements in the key metrics before we could muster much enthusiasm. It’s always interesting to track share price performance over the longer term. But to understand Millennium & Copthorne Hotels New Zealand better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we’ve spotted with Millennium & Copthorne Hotels New Zealand (including 1 which doesn’t sit too well with us) .
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
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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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using 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 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.
