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Investors can approximate the average market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by Capital Partners S.A. (WSE:CPA) shareholders over the last year, as the share price declined 46%. That contrasts poorly with the market return of -3.7%. Notably, shareholders had a tough run over the longer term, too, with a drop of 33% in the last three years. Even worse, it's down 11% in about a month, which isn't fun at all. However, we note the price may have been impacted by the broader market, which is down 6.6% in the same time period.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).
During the last year Capital Partners saw its earnings per share drop below zero. Buyers no doubt think it's a temporary situation, but those with a nose for quality have low tolerance for losses. We hope for shareholders' sake that the company becomes profitable again soon.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Capital Partners's key metrics by checking this interactive graph of Capital Partners's earnings, revenue and cash flow.
A Different Perspective
While the broader market lost about 3.7% in the twelve months, Capital Partners shareholders did even worse, losing 46%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 0.7%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on PL 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 email@example.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. Thank you for reading.