Did Changing Sentiment Drive Distell Group Holdings' (JSE:DGH) Share Price Down By 37%?

Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Distell Group Holdings Limited (JSE:DGH) have tasted that bitter downside in the last year, as the share price dropped 37%. That falls noticeably short of the market decline of around 12%. Because Distell Group Holdings hasn't been listed for many years, the market is still learning about how the business performs. Furthermore, it's down 31% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 17% in the same timeframe.

View our latest analysis for Distell Group 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 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.

Unfortunately Distell Group Holdings reported an EPS drop of 45% for the last year. This fall in the EPS is significantly worse than the 37% the share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have expected earnings to drop faster.

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. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Dive deeper into the earnings by checking this interactive graph of Distell Group Holdings'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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Distell Group Holdings's TSR for the last year was -34%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We doubt Distell Group Holdings shareholders are happy with the loss of 34% over twelve months (even including dividends) . That falls short of the market, which lost 12%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. The share price decline has continued throughout the most recent three months, down 31%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. It's always interesting to track share price performance over the longer term. But to understand Distell Group Holdings better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 5 warning signs for Distell Group Holdings (of which 1 is potentially serious!) you should know about.

But note: Distell Group Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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