Shareholders in Temenos (VTX:TEMN) are in the red if they invested three years ago

By
Simply Wall St
Published
May 14, 2022
SWX:TEMN
Source: Shutterstock

Temenos AG (VTX:TEMN) shareholders should be happy to see the share price up 15% in the last month. But that doesn't change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 41% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for Temenos

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).

Temenos saw its EPS decline at a compound rate of 0.3% per year, over the last three years. This reduction in EPS is slower than the 16% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
SWX:TEMN Earnings Per Share Growth May 14th 2022

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

A Different Perspective

While the broader market gained around 4.6% in the last year, Temenos shareholders lost 24% (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. Longer term investors wouldn't be so upset, since they would have made 3%, 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. It's always interesting to track share price performance over the longer term. But to understand Temenos better, we need to consider many other factors. For example, we've discovered 1 warning sign for Temenos that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

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