Over the last month the Tekmar Group plc (LON:TGP) has been much stronger than before, rebounding by 89%. But that doesn't change the fact that the returns over the last year have been less than pleasing. In fact the stock is down 50% in the last year, well below the market return.
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.
Unhappily, Tekmar Group had to report a 20% decline in EPS over the last year. This reduction in EPS is not as bad as the 50% share price fall. This suggests the EPS fall has made some shareholders are more nervous about the business.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Tekmar Group's earnings, revenue and cash flow.
A Different Perspective
Tekmar Group shareholders are down 50% for the year, even worse than the market loss of 3.1%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 21% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. 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. For example, we've discovered 3 warning signs for Tekmar Group that you should be aware of before investing here.
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 GB exchanges.
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