Aguas Andinas'(SNSE:AGUAS-A) Share Price Is Down 41% Over The Past Three Years.

For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. Unfortunately, that's been the case for longer term Aguas Andinas S.A. (SNSE:AGUAS-A) shareholders, since the share price is down 41% in the last three years, falling well short of the market decline of around 15%. And more recent buyers are having a tough time too, with a drop of 33% in the last year. In contrast, the stock price has popped 9.5% in the last thirty days. But this could be related to good market conditions, with stocks up around 8.0% during the period.

Check out our latest analysis for Aguas Andinas

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.

During the three years that the share price fell, Aguas Andinas' earnings per share (EPS) dropped by 6.7% each year. 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. This increased caution is also evident in the rather low P/E ratio, which is sitting at 10.95.

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

This free interactive report on Aguas Andinas' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What about the Total Shareholder Return (TSR)?

We've already covered Aguas Andinas' share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Aguas Andinas' TSR, which was a 32% drop over the last 3 years, was not as bad as the share price return.

A Different Perspective

While the broader market lost about 8.2% in the twelve months, Aguas Andinas shareholders did even worse, losing 31%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Case in point: We've spotted 1 warning sign for Aguas Andinas you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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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