0.1% earnings growth over 3 years has not materialized into gains for Delta Plus Group (EPA:ALDLT) shareholders over that period

For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Delta Plus Group (EPA:ALDLT) shareholders have had that experience, with the share price dropping 33% in three years, versus a market return of about 42%. The more recent news is of little comfort, with the share price down 29% in a year. The falls have accelerated recently, with the share price down 24% in the last three months.

After losing 15% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for Delta Plus Group

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

During the unfortunate three years of share price decline, Delta Plus Group actually saw its earnings per share (EPS) improve by 0.3% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.

After considering the numbers, we'd posit that the the market had higher expectations of EPS growth, three years back. Looking to other metrics might better explain the share price change.

Revenue is actually up 8.5% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Delta Plus Group more closely, as sometimes stocks fall unfairly. This could present an opportunity.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

This free interactive report on Delta Plus Group's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Delta Plus Group's TSR for the last 3 years was -29%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Delta Plus Group shareholders are down 28% for the year (even including dividends), but the market itself is up 4.8%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 5%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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 example, we've discovered 1 warning sign for Delta Plus Group that you should be aware of before investing here.

We will like Delta Plus Group better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.