Samebest Co., Ltd. (GTSM:8489) shareholders should be happy to see the share price up 15% in the last quarter. Meanwhile over the last three years the stock has dropped hard. In that time, the share price dropped 67%. Some might say the recent bounce is to be expected after such a bad drop. Perhaps the company has turned over a new leaf.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, Samebest's earnings per share (EPS) dropped by 34% each year. This change in EPS is reasonably close to the 31% average annual decrease in the share price. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. In this case, it seems that the EPS is guiding the share price.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It might be well worthwhile taking a look at our free report on Samebest'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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Samebest, it has a TSR of -64% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Samebest shareholders are down 54% for the year, (even including dividends), but the broader market is up 25%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Shareholders have lost 18% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. 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. Take risks, for example - Samebest has 3 warning signs we think you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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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