Market is not liking Holland Colours' (AMS:HOLCO) earnings decline as stock retreats 12% this week

As an investor its worth striving to ensure your overall portfolio beats the market average. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Holland Colours N.V. (AMS:HOLCO) shareholders have had that experience, with the share price dropping 27% in three years, versus a market return of about 61%. Even worse, it's down 13% in about a month, which isn't fun at all. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.

If the past week is anything to go by, investor sentiment for Holland Colours isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

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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 three years that the share price fell, Holland Colours' earnings per share (EPS) dropped by 18% each year. This fall in the EPS is worse than the 10% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

Dive deeper into Holland Colours' key metrics by checking this interactive graph of Holland Colours's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Holland Colours, it has a TSR of -17% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Holland Colours provided a TSR of 5.2% over the last twelve months. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 3% over half a decade It is possible that returns will improve along with the business fundamentals. It's always interesting to track share price performance over the longer term. But to understand Holland Colours better, we need to consider many other factors. To that end, you should learn about the 4 warning signs we've spotted with Holland Colours (including 2 which are potentially serious) .

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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