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If You Had Bought Fletcher Building's (NZSE:FBU) Shares Three Years Ago You Would Be Down 25%

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·3 min read
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It is a pleasure to report that the Fletcher Building Limited (NZSE:FBU) is up 49% in the last quarter. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 25% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

View our latest analysis for Fletcher Building

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

Fletcher Building saw its share price decline over the three years in which its EPS also dropped, falling to a loss. This was, in part, due to extraordinary items impacting earnings. Due to the loss, it's not easy to use EPS as a reliable guide to the business. But it's safe to say we'd generally expect the share price to be lower as a result!

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
earnings-per-share-growth

We know that Fletcher Building has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Fletcher Building's total shareholder return (TSR) and its share price change, which we've covered above. 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. Dividends have been really beneficial for Fletcher Building shareholders, and that cash payout explains why its total shareholder loss of 17%, over the last 3 years, isn't as bad as the share price return.

A Different Perspective

Fletcher Building shareholders gained a total return of 10% during the year. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 1.0% per year, over five years. So this might be a sign the business has turned its fortunes around. It's always interesting to track share price performance over the longer term. But to understand Fletcher Building better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Fletcher Building (at least 1 which is significant) , and understanding them should be part of your investment process.

Of course Fletcher Building 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 NZ exchanges.

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.