Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the Paref SA (EPA:PAR) share price slid 27% over twelve months. That's disappointing when you consider the market declined 1.8%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 17% in three years. There was little comfort for shareholders in the last week as the price declined a further 1.6%.
View our latest analysis for Paref
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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 twelve months during which the Paref share price fell, it actually saw its earnings per share (EPS) improve by 18%. It's quite possible that growth expectations may have been unreasonable in the past.
It's surprising to see the share price fall so much, despite the improved EPS. So it's easy to justify a look at some other metrics.
Paref's dividend seems healthy to us, so we doubt that the yield is a concern for the market. The revenue trend doesn't seem to explain why the share price is down. Unless, of course, the market was expecting a revenue uptick.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Paref's TSR for the last year was -23%, 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
While the broader market gained around 1.8% in the last year, Paref shareholders lost 23% (even including dividends). 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 7%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Case in point: We've spotted 4 warning signs for Paref you should be aware of, and 1 of them is concerning.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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. 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.
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About ENXTPA:PAR
Paref
Owns and manages business real estate located primarily in the Paris region.
Good value slight.
