For many investors, the main point of stock picking is to generate higher returns than the overall market. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term PageGroup plc (LON:PAGE) shareholders have had that experience, with the share price dropping 17% in three years, versus a market decline of about 4.2%.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
During the three years that the share price fell, PageGroup's earnings per share (EPS) dropped by 16% each year. This fall in the EPS is worse than the 6% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
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)?
We'd be remiss not to mention the difference between PageGroup's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. PageGroup's TSR of was a loss of 7.7% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
We regret to report that PageGroup shareholders are down 6.7% for the year. Unfortunately, that's worse than the broader market decline of 3.3%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 7%, 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with PageGroup , and understanding them should be part of your investment process.
Of course PageGroup 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 GB 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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