If you love investing in stocks you’re bound to buy some losers. Long term MaxiTRANS Industries Limited (ASX:MXI) shareholders know that all too well, since the share price is down considerably over three years. Sadly for them, the share price is down 64% in that time. And the ride hasn’t got any smoother in recent times over the last year, with the price 57% lower in that time. It’s up 4.9% in the last seven days.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Over the three years that the share price declined, MaxiTRANS Industries’s earnings per share (EPS) dropped significantly, falling to a loss. Due to the loss, it’s not easy to use EPS as a reliable guide to the business. However, we can say we’d expect to see a falling share price in this scenario.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into MaxiTRANS Industries’s key metrics by checking this interactive graph of MaxiTRANS Industries’s earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
Investors should note that there’s a difference between MaxiTRANS Industries’s total shareholder return (TSR) and its share price change, which we’ve covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. MaxiTRANS Industries’s TSR of was a loss of 60% for the 3 years. That wasn’t as bad as its share price return, because it has paid dividends.
A Different Perspective
While the broader market gained around 25% in the last year, MaxiTRANS Industries shareholders lost 57%. 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 15% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It’s always interesting to track share price performance over the longer term. But to understand MaxiTRANS Industries better, we need to consider many other factors. For example, we’ve discovered 1 warning sign for MaxiTRANS Industries that you should be aware of before investing here.
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 AU exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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