Compagnie Plastic Omnium (EPA:POM) sheds €85m, company earnings and investor returns have been trending downwards for past five years

We think intelligent long term investing is the way to go. But no-one is immune from buying too high. To wit, the Compagnie Plastic Omnium SE (EPA:POM) share price managed to fall 63% over five long years. That is extremely sub-optimal, to say the least. Shareholders have had an even rougher run lately, with the share price down 11% in the last 90 days.

After losing 3.8% 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 Compagnie Plastic Omnium

SWOT Analysis for Compagnie Plastic Omnium

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During the five years over which the share price declined, Compagnie Plastic Omnium's earnings per share (EPS) dropped by 16% each year. This change in EPS is reasonably close to the 18% 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 change has reflected changes in earnings per share.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Compagnie Plastic Omnium has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Compagnie Plastic Omnium, it has a TSR of -59% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market gained around 15% in the last year, Compagnie Plastic Omnium shareholders lost 13% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 10% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 2 warning signs for Compagnie Plastic Omnium that you should be aware of.

But note: Compagnie Plastic Omnium may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.