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Imagine Owning Sociedad Química y Minera de Chile (NYSE:SQM) And Wondering If The 42% Share Price Slide Is Justified

Simply Wall St

Sociedad Química y Minera de Chile S.A. (NYSE:SQM) shareholders should be happy to see the share price up 27% in the last month. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 42% in the last three years, falling well short of the market return.

See our latest analysis for Sociedad Química y Minera de Chile

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the three years that the share price fell, Sociedad Química y Minera de Chile's earnings per share (EPS) dropped by 0.02% each year. This reduction in EPS is slower than the 17% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

NYSE:SQM Past and Future Earnings April 22nd 2020
NYSE:SQM Past and Future Earnings April 22nd 2020

It might be well worthwhile taking a look at our free report on Sociedad Química y Minera de Chile's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for Sociedad Química y Minera de Chile the TSR over the last 3 years was -37%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 4.9% in the twelve months, Sociedad Química y Minera de Chile shareholders did even worse, losing 40% (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 2.0%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Sociedad Química y Minera de Chile is showing 3 warning signs in our investment analysis , you should know about...

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

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. Thank you for reading.