Shareholders In Bouygues In The Red If They Invested Five Years Ago

The main aim of stock picking is to find the market-beating stocks. But in any portfolio, there will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in Bouygues SA (EPA:EN), since the last five years saw the share price fall 34%.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Bouygues

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 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, Bouygues' earnings per share (EPS) dropped by 5.5% each year. This reduction in EPS is less than the 8% annual reduction in the share price. This implies that the market was previously too optimistic about the stock.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Bouygues' key metrics by checking this interactive graph of Bouygues'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. 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. We note that for Bouygues the TSR over the last 5 years was -16%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in Bouygues had a tough year, with a total loss of 2.8% (including dividends), against a market gain of about 2.4%. 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 3% 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. Take risks, for example - Bouygues has 2 warning signs we think 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 FR 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.