1.7% earnings growth over 5 years has not materialized into gains for Caverion Oyj (HEL:CAV1V) shareholders over that period

By
Simply Wall St
Published
January 22, 2022
HLSE:CAV1V
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 even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in Caverion Oyj (HEL:CAV1V), since the last five years saw the share price fall 19%.

After losing 5.1% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Check out our latest analysis for Caverion Oyj

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 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.

Caverion Oyj became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.

The modest 1.6% dividend yield is unlikely to be guiding the market view of the stock. The revenue fall of 2.4% per year for five years is neither good nor terrible. But if the market expected durable top line growth, then that could explain the share price weakness.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
HLSE:CAV1V Earnings and Revenue Growth January 22nd 2022

We know that Caverion Oyj has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Caverion Oyj's financial health with this free report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Caverion Oyj the TSR over the last 5 years was -15%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Caverion Oyj provided a TSR of 7.3% over the year (including dividends). That's fairly close to the broader market return. 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. While 'turnarounds seldom turn' there are green shoots for Caverion Oyj. Is Caverion Oyj cheap compared to other companies? These 3 valuation measures might help you decide.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on FI exchanges.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.