Investing in stocks inevitably means buying into some companies that perform poorly. But the long term shareholders of Prosegur Cash, S.A. (BME:CASH) have had an unfortunate run in the last three years. Sadly for them, the share price is down 70% in that time. There was little comfort for shareholders in the last week as the price declined a further 2.3%.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
During the three years that the share price fell, Prosegur Cash's earnings per share (EPS) dropped by 63% each year. This fall in the EPS is worse than the 33% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. This positive sentiment is also reflected in the generous P/E ratio of 73.31.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Prosegur Cash's key metrics by checking this interactive graph of Prosegur Cash's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Prosegur Cash, it has a TSR of -66% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Prosegur Cash shareholders are down 0.8% for the year, (even including dividends), but the broader market is up 37%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 18% per annum loss investors have suffered over the last three years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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 3 warning signs for Prosegur Cash that you should be aware of.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on ES 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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