The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Bénéteau S.A. (EPA:BEN) have tasted that bitter downside in the last year, as the share price dropped 40%. That falls noticeably short of the market return of around 6.6%. However, the longer term returns haven’t been so bad, with the stock down 9.3% in the last three years. Furthermore, it’s down 18% in about a quarter. That’s not much fun for holders.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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).
Even though the Bénéteau share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped. It seems quite likely that the market was expecting higher growth from the stock. But looking to other metrics might better explain the share price change.
Bénéteau managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don’t readily explain the share price drop, there might be an opportunity if the market has overreacted.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
It is of course excellent to see how Bénéteau has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What about the Total Shareholder Return (TSR)?
We’ve already covered Bénéteau’s share price action, but we should also mention its 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. Dividends have been really beneficial for Bénéteau shareholders, and that cash payout explains why its total shareholder loss of 38%, over the last year, isn’t as bad as the share price return.
A Different Perspective
Bénéteau shareholders are down 38% for the year (even including dividends), but the market itself is up 6.6%. 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 0.5%, 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. Before forming an opinion on Bénéteau you might want to consider these 3 valuation metrics.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on FR 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.