Generally speaking long term investing is the way to go. But along the way some stocks are going to perform badly. For example, after five long years the CTT - Correios De Portugal, S.A. (ELI:CTT) share price is a whole 73% lower. That's an unpleasant experience for long term holders. And some of the more recent buyers are probably worried, too, with the stock falling 22% in the last year. The falls have accelerated recently, with the share price down 17% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the five years over which the share price declined, CTT - Correios De Portugal's earnings per share (EPS) dropped by 32% each year. The share price decline of 23% per year isn't as bad as the EPS decline. So the market may previously have expected a drop, or else it expects the situation will improve.
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 CTT - Correios De Portugal's key metrics by checking this interactive graph of CTT - Correios De Portugal's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between CTT - Correios De Portugal's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for CTT - Correios De Portugal shareholders, and that cash payout explains why its total shareholder loss of 63%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
CTT - Correios De Portugal shareholders are down 22% for the year, but the market itself is up 0.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. For instance, we've identified 4 warning signs for CTT - Correios De Portugal that you should be aware of.
But note: CTT - Correios De Portugal may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on PT 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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