Statistically speaking, long term investing is a profitable endeavour. But that doesn’t mean long term investors can avoid big losses. To wit, the AGES Industri AB (publ) (STO:AGES B) share price managed to fall 67% over five long years. We certainly feel for shareholders who bought near the top. And it’s not just long term holders hurting, because the stock is down 38% in the last year. Shareholders have had an even rougher run lately, with the share price down 40% in the last 90 days.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Looking back five years, both AGES Industri’s share price and EPS declined; the latter at a rate of 9.6% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 20% per year, over the period. This implies that the market was previously too optimistic about the stock.
You can see how EPS has changed over time in the image below.
Dive deeper into AGES Industri’s key metrics by checking this interactive graph of AGES Industri’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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for AGES Industri the TSR over the last 5 years was -62%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Investors in AGES Industri had a tough year, with a total loss of 38% (including dividends) , against a market gain of about 6.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 18% per year over five years. 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. Before forming an opinion on AGES Industri you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
But note: AGES Industri 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 SE 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 firstname.lastname@example.org. 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.