Ideally, your overall portfolio should beat the market average. But even the best stock picker will only win with some selections. So we wouldn’t blame long term Daktronics, Inc. (NASDAQ:DAKT) shareholders for doubting their decision to hold, with the stock down 48% over a half decade. We also note that the stock has performed poorly over the last year, with the share price down 28%. Furthermore, it’s down 19% in about a quarter. That’s not much fun for holders.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company’s share price and its earnings per share (EPS).
Over five years Daktronics’s earnings per share dropped significantly, falling to a loss, with the share price also lower. Since the company has fallen to a loss making position, it’s hard to compare the change in EPS with the share price change. But we would generally expect a lower price, given the situation.
It’s probably worth noting that the CEO is paid less than the median at similar sized 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 Daktronics’s earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Daktronics’s TSR for the last 5 years was -37%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We regret to report that Daktronics shareholders are down 26% for the year (even including dividends). Unfortunately, that’s worse than the broader market decline of 0.05%. Having said that, it’s inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8.9% over the last half decade. We realise that Buffett has said investors should ‘buy when there is blood on the streets’, but we caution that investors should first be sure they are buying a high quality businesses. Keeping this in mind, a solid next step might be to take a look at Daktronics’s dividend track record. This free interactive graph is a great place to start.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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.