Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in BSE Limited (NSE:BSE) have tasted that bitter downside in the last year, as the share price dropped 32%. That contrasts poorly with the market return of -4.9%. We wouldn't rush to judgement on BSE because we don't have a long term history to look at. Shareholders have had an even rougher run lately, with the share price down 11% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 6.1% in the same timeframe.
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 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.
Unhappily, BSE had to report a 0.4% decline in EPS over the last year. This reduction in EPS is not as bad as the 32% share price fall. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into BSE's key metrics by checking this interactive graph of BSE's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, BSE's TSR for the last year was -29%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
BSE shareholders are down 29% for the year (even including dividends), even worse than the market loss of 4.9%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. With the stock down 11% over the last three months, the market doesn't seem to believe that the company has solved all its problems. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. Before forming an opinion on BSE you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
But note: BSE 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 IN 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.