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The simplest way to benefit from a rising market is to buy an index fund. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Metall Zug AG (VTX:METN) shareholders over the last year, as the share price declined 25%. That’s disappointing when you consider the market returned 3.5%. However, the longer term returns haven’t been so bad, with the stock down 16% in the last three years. Furthermore, it’s down 16% in about a quarter. That’s not much fun for holders.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).
Unfortunately Metall Zug reported an EPS drop of 6.1% for the last year. The share price decline of 25% is actually more than the EPS drop. So it seems the market was too confident about the business, a year ago.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It might be well worthwhile taking a look at our free report on Metall Zug’s earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between Metall Zug’s total shareholder return (TSR) and its share price return. 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 Metall Zug shareholders, and that cash payout explains why its total shareholder loss of 23%, over the last year, isn’t as bad as the share price return.
A Different Perspective
While the broader market gained around 3.5% in the last year, Metall Zug shareholders lost 23% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn’t be so upset, since they would have made 0.3%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Is Metall Zug cheap compared to other companies? These 3 valuation measures might help you decide.
But note: Metall Zug may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CH 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.