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Did Changing Sentiment Drive Geox's (BIT:GEO) Share Price Down By 46%?

Simply Wall St

It is doubtless a positive to see that the Geox S.p.A. (BIT:GEO) share price has gained some 32% in the last three months. But if you look at the last five years the returns have not been good. In fact, the share price is down 46%, which falls well short of the return you could get by buying an index fund.

See our latest analysis for Geox

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Geox has made a profit in the past. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. Other metrics may better explain the share price move.

We don't think that the 1.5% is big factor in the share price, since it's quite small, as dividends go. Revenue is actually up 2.2% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).

BIT:GEO Income Statement, April 18th 2019

This free interactive report on Geox's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Geox the TSR over the last 5 years was -43%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We regret to report that Geox shareholders are down 40% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 4.2%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% over the last half decade. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IT 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 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. Thank you for reading.