As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term Aeroports de Paris SA (EPA:ADP) shareholders, since the share price is down 44% in the last three years, falling well short of the market return of around 29%.
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Over the three years that the share price declined, Aeroports de Paris' earnings per share (EPS) dropped significantly, falling to a loss. Due to the loss, it's not easy to use EPS as a reliable guide to the business. But it's safe to say we'd generally expect the share price to be lower as a result!
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Aeroports de Paris' total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Aeroports de Paris' TSR, which was a 42% drop over the last 3 years, was not as bad as the share price return.
A Different Perspective
Aeroports de Paris shareholders gained a total return of 13% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 0.2% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. It's always interesting to track share price performance over the longer term. But to understand Aeroports de Paris better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Aeroports de Paris you should know about.
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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