Fnac Darty (EPA:FNAC) stock falls 7.1% in past week as five-year earnings and shareholder returns continue downward trend

We think intelligent long term investing is the way to go. But no-one is immune from buying too high. To wit, the Fnac Darty SA (EPA:FNAC) share price managed to fall 63% over five long years. That's an unpleasant experience for long term holders. And we doubt long term believers are the only worried holders, since the stock price has declined 35% over the last twelve months.

If the past week is anything to go by, investor sentiment for Fnac Darty isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Check out our latest analysis for Fnac Darty

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the five years over which the share price declined, Fnac Darty's earnings per share (EPS) dropped by 4.5% each year. This reduction in EPS is less than the 18% annual reduction in the share price. This implies that the market is more cautious about the business these days. The low P/E ratio of 8.62 further reflects this reticence.

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

This free interactive report on Fnac Darty's earnings, revenue and cash flow 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). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Fnac Darty, it has a TSR of -60% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Investors in Fnac Darty had a tough year, with a total loss of 31% (including dividends), against a market gain of about 7.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Fnac Darty you should know about.

Of course Fnac Darty may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.