A Look At Formosa Oilseed Processing's (TPE:1225) Share Price Returns

For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, your risk returning less than the market. Unfortunately, that's been the case for longer term Formosa Oilseed Processing Co., Ltd. (TPE:1225) shareholders, since the share price is down 51% in the last three years, falling well short of the market return of around 45%. There was little comfort for shareholders in the last week as the price declined a further 2.1%.

View our latest analysis for Formosa Oilseed Processing

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 three years that the share price fell, Formosa Oilseed Processing's earnings per share (EPS) dropped by 3.0% each year. This reduction in EPS is slower than the 21% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

Dive deeper into Formosa Oilseed Processing's key metrics by checking this interactive graph of Formosa Oilseed Processing'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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Formosa Oilseed Processing the TSR over the last 3 years was -48%, 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

Investors in Formosa Oilseed Processing had a tough year, with a total loss of 6.1% (including dividends), against a market gain of about 25%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 8% 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. Case in point: We've spotted 3 warning signs for Formosa Oilseed Processing you should be aware of, and 2 of them are potentially serious.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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