We’re definitely into long term investing, but some companies are simply bad investments over any time frame. We really hate to see fellow investors lose their hard-earned money. Spare a thought for those who held Polaris Infrastructure Inc. (TSE:PIF) for five whole years – as the share price tanked 91%. We also note that the stock has performed poorly over the last year, with the share price down 38%. Contrary to the longer term story, the last month has been good for stockholders, with a share price gain of 9.0%.
We really feel for shareholders in this scenario. It’s a good reminder of the importance of diversification, and it’s worth keeping in mind there’s more to life than money, anyway.
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, Polaris Infrastructure moved from a loss to profitability. Most would consider that to be a good thing, so it’s counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.
The steady dividend doesn’t really explain why the share price is down. While it’s not completely obvious why the share price is down, a closer look at the company’s history might help explain it.
Depicted in the graphic below, you’ll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
It’s good to see that there was some significant insider buying in the last three months. That’s a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. You can see what analysts are predicting for Polaris Infrastructure in this interactive graph of future profit estimates.
What about the Total Shareholder Return (TSR)?
We’ve already covered Polaris Infrastructure’s share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Polaris Infrastructure’s TSR, which was a 90% drop over the last 5 years, was not as bad as the share price return.
A Different Perspective
Investors in Polaris Infrastructure had a tough year, with a total loss of 34% (including dividends), against a market gain of about 7.8%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn’t as bad as the 36% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Polaris Infrastructure by clicking this link.
Polaris Infrastructure is not the only stock that insiders are buying. 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 CA exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.