This week we saw the Krynica Vitamin S.A. (WSE:KVT) share price climb by 14%. It’s not great that the stock is down over the last three years. But that’s not so bad when you consider its market is down 33%.
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, Krynica Vitamin’s earnings per share (EPS) dropped by 7.4% each year. This reduction in EPS is slower than the 14% annual reduction in the share price. So it seems the market was too confident about the business, in the past. This increased caution is also evident in the rather low P/E ratio, which is sitting at 8.72.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Dive deeper into Krynica Vitamin’s key metrics by checking this interactive graph of Krynica Vitamin’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. We note that for Krynica Vitamin the TSR over the last 3 years was -22%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It’s nice to see that Krynica Vitamin shareholders have gained 0.5% (in total) over the last year. That includes the value of the dividend. What is absolutely clear is that is far preferable to the dismal 7.9% average annual loss suffered over the last three years. It could well be that the business has turned around — or else regained the confidence of investors. 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. Take risks, for example – Krynica Vitamin has 5 warning signs (and 1 which is significant) we think you should know about.
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on PL exchanges.
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