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In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But in any portfolio, there will be mixed results between individual stocks. So we wouldn't blame long term Electra Gruppen AB (publ) (STO:ELEC) shareholders for doubting their decision to hold, with the stock down 58% over a half decade. And some of the more recent buyers are probably worried, too, with the stock falling 26% in the last year. Unfortunately the share price momentum is still quite negative, with prices down 24% in thirty days. 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.
Looking back five years, both Electra Gruppen's share price and EPS declined; the latter at a rate of 12% per year. This reduction in EPS is less than the 16% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 11.31.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Electra Gruppen's key metrics by checking this interactive graph of Electra Gruppen's earnings, revenue and cash flow.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Electra Gruppen's TSR for the last 5 years was -41%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Investors in Electra Gruppen had a tough year, with a total loss of 21% (including dividends), against a market gain of about 3.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Importantly, we haven't analysed Electra Gruppen's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.
Of course Electra Gruppen may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SE 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.