The main aim of stock picking is to find the market-beating stocks. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Tikkurila Oyj (HEL:TIK1V), since the last five years saw the share price fall 29%. It’s down 3.6% in the last seven days.
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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, Tikkurila Oyj’s earnings per share (EPS) dropped by 22% each year. The share price decline of 6.7% per year isn’t as bad as the EPS decline. The relatively muted share price reaction might be because the market expects the business to turn around.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Tikkurila Oyj has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Tikkurila Oyj will grow revenue in the future.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Tikkurila Oyj’s TSR for the last 5 years was -13%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We regret to report that Tikkurila Oyj shareholders are down 5.7% for the year (even including dividends). Unfortunately, that’s worse than the broader market decline of 3.7%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 2.7% per year over five years. 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. Before forming an opinion on Tikkurila Oyj you might want to consider these 3 valuation metrics.
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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 FI exchanges.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Thank you for reading.