It’s easy to match the overall market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the Kaiser Aluminum Corporation (NASDAQ:KALU) share price is down 18% in the last year. That’s well bellow the market return of 1.2%. The silver lining (for longer term investors) is that the stock is still 8.1% higher than it was three years ago. Unhappily, the share price slid 4.7% in the last week.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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.
Even though the Kaiser Aluminum share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped. It’s fair to say that the share price does not seem to be reflecting the EPS growth. So it’s well worth checking out some other metrics, too.
Kaiser Aluminum managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don’t readily explain the share price drop, there might be an opportunity if the market has overreacted.
We know that Kaiser Aluminum has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Kaiser Aluminum will earn in the future (free profit forecasts).
What about the Total Shareholder Return (TSR)?
We’ve already covered Kaiser Aluminum’s share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Kaiser Aluminum’s TSR, which was a 16% drop over the last year, was not as bad as the share price return.
A Different Perspective
While the broader market gained around 1.2% in the last year, Kaiser Aluminum shareholders lost 16% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 5.2% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Before spending more time on Kaiser Aluminum it might be wise to click here to see if insiders have been buying or selling shares.
We will like Kaiser Aluminum better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.