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It's easy to match the overall market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. For example, the Atria Oyj (HEL:ATRAV) share price is down 34% in the last year. That's disappointing when you consider the market returned -2.4%. At least the damage isn't so bad if you look at the last three years, since the stock is down 16% in that time. Furthermore, it's down 12% in about a quarter. That's not much fun for holders. But this could be related to the weak market, which is down 6.7% in the same period.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Unhappily, Atria Oyj had to report a 55% decline in EPS over the last year. The share price fall of 34% isn't as bad as the reduction in earnings per share. It may have been that the weak EPS was not as bad as some had feared.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Atria Oyj, it has a TSR of -31% for the last year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While the broader market lost about 2.4% in the twelve months, Atria Oyj shareholders did even worse, losing 31% (even including dividends). 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. Longer term investors wouldn't be so upset, since they would have made 4.5%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before forming an opinion on Atria Oyj you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on FI 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 firstname.lastname@example.org. 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.