Imagine Owning ServiceMaster Global Holdings (NYSE:SERV) And Wondering If The 19% Share Price Slide Is Justified
The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the ServiceMaster Global Holdings, Inc. (NYSE:SERV) share price slid 19% over twelve months. That's well bellow the market return of 7.4%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 5.9% in three years. Unhappily, the share price slid 1.8% in the last week.
View our latest analysis for ServiceMaster Global Holdings
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 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.
ServiceMaster Global Holdings fell to a loss making position during the year. Some investors no doubt dumped the stock as a result. Of course, if the company can turn the situation around, investors will likely profit.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of ServiceMaster Global Holdings's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between ServiceMaster Global Holdings'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. We note that ServiceMaster Global Holdings's TSR, at -19% is higher than its share price return of -19%. When you consider it hasn't been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.
A Different Perspective
ServiceMaster Global Holdings shareholders are down 19% for the year, but the market itself is up 7.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 9.5%, each year, over five years. 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. It's always interesting to track share price performance over the longer term. But to understand ServiceMaster Global Holdings better, we need to consider many other factors. For example, we've discovered 1 warning sign for ServiceMaster Global Holdings that you should be aware of before investing here.
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 US exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.
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. Thank you for reading.