It’s easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. For example, the Pangaea Logistics Solutions, Ltd. (NASDAQ:PANL) share price is down 41% in the last year. That’s disappointing when you consider the market returned 8.9%. At least the damage isn’t so bad if you look at the last three years, since the stock is down 24% in that time. Unfortunately the share price momentum is still quite negative, with prices down 15% in thirty days.
See our latest analysis for Pangaea Logistics Solutions
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Unfortunately Pangaea Logistics Solutions reported an EPS drop of 93% for the last year. This fall in the EPS is significantly worse than the 41% the share price fall. So despite the weak per-share profits, some investors are probably relieved the situation wasn’t more difficult. With a P/E ratio of 75.51, it’s fair to say the market sees an EPS rebound on the cards.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It might be well worthwhile taking a look at our free report on Pangaea Logistics Solutions’ earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
Investors should note that there’s a difference between Pangaea Logistics Solutions’ total shareholder return (TSR) and its share price change, which we’ve covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Pangaea Logistics Solutions shareholders, and that cash payout explains why its total shareholder loss of 39%, over the last year, isn’t as bad as the share price return.
A Different Perspective
Investors in Pangaea Logistics Solutions had a tough year, with a total loss of 39%, against a market gain of about 8.9%. 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. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6.5% over the last half decade. We realise that Baron Rothschild has said investors should “buy when there is blood on the streets”, but we caution that investors should first be sure they are buying a high quality business. 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. Consider for instance, the ever-present spectre of investment risk. We’ve identified 5 warning signs with Pangaea Logistics Solutions (at least 1 which is concerning) , and understanding them should be part of your investment process.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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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