In order to justify the effort of selecting individual stocks, it’s worth striving to beat the returns from a market index fund. But if you try your hand at stock picking, your risk returning less than the market. Unfortunately, that’s been the case for longer term Société BIC SA (EPA:BB) shareholders, since the share price is down 37% in the last three years, falling well short of the market return of around 38%. The falls have accelerated recently, with the share price down 12% in the last three months. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
During the three years that the share price fell, Société BIC’s earnings per share (EPS) dropped by 17% each year. In comparison the 14% compound annual share price decline isn’t as bad as the EPS drop-off. So the market may not be too worried about the EPS figure, at the moment — or it may have previously priced some of the drop in.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Société BIC’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Société BIC the TSR over the last 3 years was -28%, 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
Société BIC shareholders gained a total return of 0.9% during the year. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 0.9% per year for five years. It’s quite possible the business continues to execute with prowess, even as the share price gains are slowing. Before forming an opinion on Société BIC you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
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 FR 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.