D4t4 Solutions (LON:D4T4) investors are sitting on a loss of 22% if they invested a year ago
The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the D4t4 Solutions Plc (LON:D4T4) share price is down 27% in the last year. That contrasts poorly with the market return of 4.7%. However, the longer term returns haven't been so bad, with the stock down 5.8% in the last three years.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
Check out our latest analysis for D4t4 Solutions
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 D4t4 Solutions share price fell, it actually saw its earnings per share (EPS) improve by 26%. It's quite possible that growth expectations may have been unreasonable in the past.
The divergence between the EPS and the share price is quite notable, during the year. So it's well worth checking out some other metrics, too.
With a low yield of 1.7% we doubt that the dividend influences the share price much. On the other hand, we're certainly perturbed by the 13% decline in D4t4 Solutions' revenue. If the market sees the weak revenue as jeopardising EPS, that could explain the lower share price.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that D4t4 Solutions has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling D4t4 Solutions stock, you should check out this free report showing analyst profit forecasts.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. In the case of D4t4 Solutions, it has a TSR of -22% for the last 1 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
Investors in D4t4 Solutions had a tough year, with a total loss of 22% (including dividends), against a market gain of about 4.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 0.6% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should be aware of the 1 warning sign we've spotted with D4t4 Solutions .
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
