Volatility 101: Should Jyske Bank (CPH:JYSK) Shares Have Dropped 25%?

January 20, 2020
  •  Updated
September 29, 2022
CPSE:JYSK
Source: Shutterstock

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term Jyske Bank A/S (CPH:JYSK) shareholders have had that experience, with the share price dropping 25% in three years, versus a market return of about 59%.

View our latest analysis for Jyske Bank

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 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.

Jyske Bank saw its EPS decline at a compound rate of 8.4% per year, over the last three years. This change in EPS is reasonably close to the 9.3% average annual decrease in the share price. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. Rather, the share price has approximately tracked EPS growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

CPSE:JYSK Past and Future Earnings, January 21st 2020
CPSE:JYSK Past and Future Earnings, January 21st 2020

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

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Jyske Bank's TSR for the last 3 years was -21%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Jyske Bank provided a TSR of 2.0% over the last twelve months. But that return falls short of the market. But at least that's still a gain! Over five years the TSR has been a reduction of 1.9% per year, over five years. So this might be a sign the business has turned its fortunes around. 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. Case in point: We've spotted 2 warning signs for Jyske Bank you should be aware of, and 1 of them is concerning.

We will like Jyske Bank 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 DK exchanges.

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.

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. Thank you for reading.

Valuation is complex, but we're helping make it simple.

Find out whether Jyske Bank is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis