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. Investors in Coronado Global Resources Inc. (ASX:CRN) have tasted that bitter downside in the last year, as the share price dropped 32%. That falls noticeably short of the market return of around 18%. Coronado Global Resources hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. The falls have accelerated recently, with the share price down 26% in the last three months. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
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...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the unfortunate twelve months during which the Coronado Global Resources share price fell, it actually saw its earnings per share (EPS) improve by 212%. It could be that the share price was previously over-hyped.
The divergence between the EPS and the share price is quite notable, during the year. But we might find some different metrics explain the share price movements better.
Coronado Global Resources's dividend seems healthy to us, so we doubt that the yield is a concern for the market. From what we can see, revenue is pretty flat, so that doesn't really explain the share price drop. Unless, of course, the market was expecting a revenue uptick.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We know that Coronado Global Resources 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 Coronado Global Resources will earn in the future (free profit forecasts).
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. In the case of Coronado Global Resources, it has a TSR of -3.2% for the last year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Given that the market gained 18% in the last year, Coronado Global Resources shareholders might be miffed that they lost 3.2% (even including dividends) . However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. It's worth noting that the last three months did the real damage, with a 26% decline. So it seems like some holders have been dumping the stock of late - and that's not bullish. If you would like to research Coronado Global Resources in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
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 AU exchanges.
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