In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But in any portfolio, there will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in Matas A/S (CPH:MATAS), since the last five years saw the share price fall 35%. More recently, the share price has dropped a further 9.7% in a month.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).
During the five years over which the share price declined, Matas' earnings per share (EPS) dropped by 8.9% each year. This change in EPS is reasonably close to the 8% average annual decrease in the share price. This implies that the market has had a fairly steady view of the stock. Rather, the share price has approximately tracked EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Matas' total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Matas' TSR of was a loss of 15% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
Matas' TSR for the year was broadly in line with the market average, at 23%. To take a positive view, the gain is pleasing, and it sure beats annualized TSR loss of 3%, which was endured over half a decade. We're pretty skeptical of turnaround stories, but it's good to see the recent share price recovery. 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. For instance, we've identified 1 warning sign for Matas that you should be aware of.
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on DK 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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