PC Jeweller Limited (NSE:PCJEWELLER) shareholders should be happy to see the share price up 27% in the last month. But that is meagre solace when you consider how the price has plummeted over the last year. Indeed, the share price is down a whopping 78% in the last year. So it’s not that amazing to see a bit of a bounce. The real question is whether the company can turn around its fortunes.
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. 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.
Even though the PC Jeweller share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth. The divergence between the EPS and the share price is quite notable, during the year. So it’s easy to justify a look at some other metrics.
With a low yield of 0.6% we doubt that the dividend influences the share price much. PC Jeweller managed to grow revenue over the last year, which is usually a real positive. Since we can’t easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
If you are thinking of buying or selling PC Jeweller stock, you should check out this FREE detailed report on its balance sheet.
What about the Total Shareholder Return (TSR)?
We’d be remiss not to mention the difference between PC Jeweller’s total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for PC Jeweller shareholders, and that cash payout explains why its total shareholder loss of 78%, over the last year, isn’t as bad as the share price return.
A Different Perspective
PC Jeweller shareholders are down 78% for the year (even including dividends), but the market itself is up 0.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn’t be so upset, since they would have made 12%, 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. Is PC Jeweller cheap compared to other companies? These 3 valuation measures might help you decide.
We will like PC Jeweller better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.
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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.