Cogeco Communications (TSE:CCA) investors are sitting on a loss of 34% if they invested three years ago

While it may not be enough for some shareholders, we think it is good to see the Cogeco Communications Inc. (TSE:CCA) share price up 25% in a single quarter. But that doesn't help the fact that the three year return is less impressive. Truth be told the share price declined 42% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

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 Cogeco Communications

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the three years that the share price fell, Cogeco Communications' earnings per share (EPS) dropped by 0.9% each year. This reduction in EPS is slower than the 17% annual reduction in the share price. So it seems the market was too confident about the business, in the past. This increased caution is also evident in the rather low P/E ratio, which is sitting at 8.15.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

Dive deeper into Cogeco Communications' key metrics by checking this interactive graph of Cogeco Communications's earnings, revenue and cash flow.

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 Cogeco Communications the TSR over the last 3 years was -34%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Cogeco Communications provided a TSR of 8.5% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 5% endured over half a decade. So this might be a sign the business has turned its fortunes around. 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 Cogeco Communications you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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