While Y.Z. Queenco Ltd. (TLV:QNCO) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 21% in the last quarter. On the bright side the share price is up over the last half decade. However we are not very impressed because the share price is only up 46%, less than the market return of 87%. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 31% drop, in the last year.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 five years of share price growth, Y.Z. Queenco moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the Y.Z. Queenco share price is down 32% in the last three years. Meanwhile, EPS is up 14% per year. It would appear there's a real mismatch between the increasing EPS and the share price, which has declined -12% a year for three years.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Y.Z. Queenco's earnings, revenue and cash flow.
A Different Perspective
While the broader market gained around 32% in the last year, Y.Z. Queenco shareholders lost 31%. 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 8%, 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. 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. Case in point: We've spotted 3 warning signs for Y.Z. Queenco you should be aware of.
But note: Y.Z. Queenco may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IL 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.