It can certainly be frustrating when a stock does not perform as hoped. But it’s hard to avoid some disappointing investments when the overall market is down. The Resilux NV (EBR:RES) is down 31% over three years, but the total shareholder return is -21% once you include the dividend. That’s better than the market which returned -27% over the last three years. Unhappily, the share price slid 3.7% in the last week.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Resilux saw its EPS decline at a compound rate of 35% per year, over the last three years. In comparison the 12% compound annual share price decline isn’t as bad as the EPS drop-off. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on Resilux’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Resilux the TSR over the last 3 years was -21%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Although it hurts that Resilux returned a loss of 14% in the last twelve months, the broader market was actually worse, returning a loss of 18%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 1.7% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. 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. Case in point: We’ve spotted 1 warning sign for Resilux you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on BE exchanges.
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