Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. That downside risk was realized by Filta Group Holdings plc (LON:FLTA) shareholders over the last year, as the share price declined 37%. That's disappointing when you consider the market returned 12%. Longer term investors have fared much better, since the share price is up 13% in three years. Shareholders have had an even rougher run lately, with the share price down 22% in the last 90 days.
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 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.
Unfortunately Filta Group Holdings reported an EPS drop of 12% for the last year. This reduction in EPS is not as bad as the 37% share price fall. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Filta Group Holdings's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Filta Group Holdings's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Filta Group Holdings shareholders, and that cash payout explains why its total shareholder loss of 36%, over the last year, isn't as bad as the share price return.
A Different Perspective
Filta Group Holdings shareholders are down 36% for the year (even including dividends) , but the broader market is up 12%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. Fortunately the longer term story is brighter, with total returns averaging about 4.8% per year over three years. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. 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. For instance, we've identified 5 warning signs for Filta Group Holdings (1 doesn't sit too well with us) that you should be aware of.
We will like Filta Group Holdings 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 GB exchanges.
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.
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.