Did You Manage To Avoid EFG International's (VTX:EFGN) 44% Share Price Drop?

While not a mind-blowing move, it is good to see that the EFG International AG (VTX:EFGN) share price has gained 13% in the last three months. But over the last half decade, the stock has not performed well. You would have done a lot better buying an index fund, since the stock has dropped 44% in that half decade.

See our latest analysis for EFG International

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).

During five years of share price growth, EFG International moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.

Revenue is actually up 12% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

You can see how revenue and earnings have changed over time in the image below, (click on the chart to see cashflow).

We know that EFG International has improved its bottom line lately, but what does the future have in store? So we recommend checking out this freereport showing consensus forecasts

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, EFG International's TSR for the last 5 years was -35%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market gained around 7.1% in the last year, EFG International shareholders lost 13% (even including dividends). 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 8.3% over the last half decade. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. Keeping this in mind, a solid next step might be to take a look at EFG International's dividend track record. This freeinteractive graph is a great place to start.

If you are like me, then you will not want to miss this freelist of growing companies that insiders are buying.

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 editorial-team@simplywallst.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. Thank you for reading.