The one-year shareholder returns and company earnings persist lower as Directa S.I.M.p.A (BIT:D) stock falls a further 11% in past week

The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Directa S.I.M.p.A. (BIT:D) have tasted that bitter downside in the last year, as the share price dropped 14%. That's well below the market return of 17%. Because Directa S.I.M.p.A hasn't been listed for many years, the market is still learning about how the business performs. Unfortunately the share price momentum is still quite negative, with prices down 13% in thirty days.

If the past week is anything to go by, investor sentiment for Directa S.I.M.p.A isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

Check out our latest analysis for Directa S.I.M.p.A

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Unfortunately Directa S.I.M.p.A reported an EPS drop of 1.1% for the last year. The share price decline of 14% is actually more than the EPS drop. So it seems the market was too confident about the business, a year ago. The P/E ratio of 11.66 also points to the negative market sentiment.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Dive deeper into Directa S.I.M.p.A's key metrics by checking this interactive graph of Directa S.I.M.p.A's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Directa S.I.M.p.A's TSR for the last 1 year was -10%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While Directa S.I.M.p.A shareholders are down 10% for the year (even including dividends), the market itself is up 17%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. With the stock down 6.3% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. 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. Even so, be aware that Directa S.I.M.p.A is showing 4 warning signs in our investment analysis , and 1 of those can't be ignored...

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Italian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.