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CDL Investments New Zealand's (NZSE:CDI) 33% return outpaced the company's earnings growth over the same one-year period

Simply Wall St · 05/29 18:02

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. For example, the CDL Investments New Zealand Limited (NZSE:CDI) share price is up 27% in the last 1 year, clearly besting the market return of around 3.9% (not including dividends). So that should have shareholders smiling. In contrast, the longer term returns are negative, since the share price is 5.4% lower than it was three years ago.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free.

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. 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.

CDL Investments New Zealand was able to grow EPS by 14% in the last twelve months. The share price gain of 27% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
NZSE:CDI Earnings Per Share Growth May 29th 2025

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

Portfolio Valuation calculation on simply wall st

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, CDL Investments New Zealand's TSR for the last 1 year was 33%, 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

It's nice to see that CDL Investments New Zealand shareholders have received a total shareholder return of 33% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 6% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Take risks, for example - CDL Investments New Zealand has 2 warning signs (and 1 which is a bit unpleasant) we think you should know about.

But note: CDL Investments New Zealand may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on New Zealander exchanges.