Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. For example, the Fuller, Smith & Turner P.L.C. (LON:FSTA) share price is down 45% in the last year. That's disappointing when you consider the market returned -19%. We note that it has not been easy for shareholders over three years, either; the share price is down 35% in that time. Furthermore, it's down 32% in about a quarter. That's not much fun for holders. Of course, this share price action may well have been influenced by the 28% decline in the broader market, throughout the 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 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).
Unhappily, Fuller Smith & Turner had to report a 44% decline in EPS over the last year. Remarkably, he share price decline of 45% per year is particularly close to the EPS drop. Given the lower EPS we might have expected investors to lose confidence in the stock, but that doesn't seemed to have happened. Rather, the share price is remains a similar multiple of the EPS, suggesting the outlook remains the same.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Fuller Smith & Turner's key metrics by checking this interactive graph of Fuller Smith & Turner'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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Fuller Smith & Turner, it has a TSR of -37% 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
We regret to report that Fuller Smith & Turner shareholders are down 37% for the year (even including dividends) . Unfortunately, that's worse than the broader market decline of 19%. 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. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4.4% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Fuller Smith & Turner better, we need to consider many other factors. To that end, you should be aware of the 3 warning signs we've spotted with Fuller Smith & Turner .
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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 GB exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.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.
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