The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. For example, the IRCE S.p.A. (BIT:IRC) share price is down 13% in the last year. That falls noticeably short of the market return of around 24%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 5.4% in three years. Unhappily, the share price slid 3.1% in the last week.
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 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.
Unfortunately IRCE reported an EPS drop of 72% for the last year. The share price fall of 13% isn't as bad as the reduction in earnings per share. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into IRCE's key metrics by checking this interactive graph of IRCE's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 IRCE the TSR over the last year was -10%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Investors in IRCE had a tough year, with a total loss of 10% (including dividends) , against a market gain of about 24%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 2.1%, 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. It's always interesting to track share price performance over the longer term. But to understand IRCE better, we need to consider many other factors. Be aware that IRCE is showing 5 warning signs in our investment analysis , and 1 of those is a bit concerning...
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IT 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.