Swiss Prime Site's (VTX:SPSN one-year decrease in earnings delivers investors with a 19% loss

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by Swiss Prime Site AG (VTX:SPSN) shareholders over the last year, as the share price declined 24%. That falls noticeably short of the market decline of around 1.1%. At least the damage isn't so bad if you look at the last three years, since the stock is down 15% in that time. And the share price decline continued over the last week, dropping some 5.1%.

If the past week is anything to go by, investor sentiment for Swiss Prime Site isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Check out our latest analysis for Swiss Prime Site

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Unfortunately Swiss Prime Site reported an EPS drop of 20% for the last year. We note that the 24% share price drop is very close to the EPS drop. Therefore one could posit that the market has not become more concerned about the company, despite the lower EPS. Instead, the change in the share price seems to reduction in earnings per share, alone.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on Swiss Prime Site's earnings, revenue and cash flow.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Swiss Prime Site's TSR for the last 1 year was -19%, 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

Swiss Prime Site shareholders are down 19% for the year (even including dividends), but the market itself is up 1.1%. 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. Longer term investors wouldn't be so upset, since they would have made 0.4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Even so, be aware that Swiss Prime Site is showing 3 warning signs in our investment analysis , and 2 of those are a bit concerning...

We will like Swiss Prime Site better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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