While it may not be enough for some shareholders, we think it is good to see the ZEAL Network SE (ETR:TIMA) share price up 17% in a single quarter. But that doesn't help the fact that the three year return is less impressive. After all, the share price is down 43% in the last three years, significantly under-performing the market.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 three years of share price decline, ZEAL Network actually saw its earnings per share (EPS) improve by 7.4% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.
It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.
We note that the dividend has declined - a likely contributor to the share price drop. It doesn't seem like the changes in revenue would have impacted the share price much, but a closer inspection of the data might reveal something.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
This free interactive report on ZEAL Network's balance sheet strength is a great place to start, if you want to investigate the stock further.
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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of ZEAL Network, it has a TSR of -37% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Investors in ZEAL Network had a tough year, with a total loss of 0.9% (including dividends) , against a market gain of about 18%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 5.6% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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 learn about the 4 warning signs we've spotted with ZEAL Network (including 1 which is is a bit unpleasant) .
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on DE exchanges.
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