Stock Analysis

Reflecting on SalfaCorp's (SNSE:SALFACORP) Share Price Returns Over The Last Three Years

SNSE:SALFACORP
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If you love investing in stocks you're bound to buy some losers. But the last three years have been particularly tough on longer term SalfaCorp S.A. (SNSE:SALFACORP) shareholders. Sadly for them, the share price is down 65% in that time. It's down 1.5% in the last seven days.

Check out our latest analysis for SalfaCorp

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

SalfaCorp saw its EPS decline at a compound rate of 16% per year, over the last three years. The share price decline of 29% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. The less favorable sentiment is reflected in its current P/E ratio of 11.14.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
SNSE:SALFACORP Earnings Per Share Growth January 1st 2021

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for SalfaCorp the TSR over the last 3 years was -62%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While it's never nice to take a loss, SalfaCorp shareholders can take comfort that , including dividends,their trailing twelve month loss of 8.9% wasn't as bad as the market loss of around 10%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 4% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with SalfaCorp (at least 2 which shouldn't be ignored) , and understanding them should be part of your investment process.

But note: SalfaCorp 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 CL exchanges.

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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. 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.
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