A2A's (BIT:A2A) Shareholders Are Down 28% On Their Shares

Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the A2A S.p.A. (BIT:A2A) share price is down 28% in the last year. That falls noticeably short of the market decline of around 14%. At least the damage isn't so bad if you look at the last three years, since the stock is down 17% in that time. There was little comfort for shareholders in the last week as the price declined a further 2.9%.

Check out our latest analysis for A2A

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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the unfortunate twelve months during which the A2A share price fell, it actually saw its earnings per share (EPS) improve by 67%. It could be that the share price was previously over-hyped.

It's fair to say that the share price does not seem to be reflecting the EPS growth. So it's well worth checking out some other metrics, too.

We don't see any weakness in the A2A's dividend so the steady payout can't really explain the share price drop. In fact, it seems more likely that the revenue fall of 5.0% in the last year is the worry. The market may be extrapolating the decline, leading to questions around the sustainability of the EPS.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We know that A2A has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think A2A will earn in the future (free profit forecasts).

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of A2A, it has a TSR of -23% for the last year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market lost about 14% in the twelve months, A2A shareholders did even worse, losing 23% (even including dividends). 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. On the bright side, long term shareholders have made money, with a gain of 5.0% per year over half a decade. 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 2 warning signs for A2A that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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