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Introducing Compass Minerals International (NYSE:CMP), The Stock That Dropped 36% In The Last Five Years

Simply Wall St
·3 min read

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Compass Minerals International, Inc. (NYSE:CMP), since the last five years saw the share price fall 36%.

Check out our latest analysis for Compass Minerals International

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Looking back five years, both Compass Minerals International's share price and EPS declined; the latter at a rate of 22% per year. The share price decline of 8.5% per year isn't as bad as the EPS decline. So the market may previously have expected a drop, or else it expects the situation will improve.

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

NYSE:CMP Past and Future Earnings, February 10th 2020
NYSE:CMP Past and Future Earnings, February 10th 2020

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Compass Minerals International'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. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Compass Minerals International, it has a TSR of -20% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Compass Minerals International shareholders are up 18% for the year (even including dividends) . Unfortunately this falls short of the market return. But at least that's still a gain! Over five years the TSR has been a reduction of 4.5% per year, over five years. So this might be a sign the business has turned its fortunes around. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Compass Minerals International (of which 1 doesn't sit too well with us!) you should know about.

Compass Minerals International is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider 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.