Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the Masi Agricola S.p.A. (BIT:MASI) share price is down 18% in the last year. That's well bellow the market return of 2.4%. Even if shareholders bought some time ago, they wouldn't be particularly happy: the stock is down 17% in three years. There was little comfort for shareholders in the last week as the price declined a further 2.2%.
Check out our latest analysis for Masi Agricola
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. 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.
Unhappily, Masi Agricola had to report a 3.5% decline in EPS over the last year. This reduction in EPS is not as bad as the 18% share price fall. So it seems the market was too confident about the business, a year ago.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Masi Agricola's key metrics by checking this interactive graph of Masi Agricola's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Masi Agricola the TSR over the last year was -16%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
The last twelve months weren't great for Masi Agricola shares, which cost holders 16% , including dividends , while the market was up about 2.4%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Shareholders have lost 3.6% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Before deciding if you like the current share price, check how Masi Agricola scores on these 3 valuation metrics.
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 IT exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.