Most people feel a little frustrated if a stock they own goes down in price. But sometimes a share price fall can have more to do with market conditions than the performance of the specific business. The KAR Auction Services, Inc. (NYSE:KAR) is down 60% over a year, but the total shareholder return is 8.7% once you include the dividend. That's better than the market which returned 1.7% over the last year. We note that it has not been easy for shareholders over three years, either; the share price is down 39% in that time. Shareholders have had an even rougher run lately, with the share price down 54% in the last 90 days. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, KAR Auction Services had to report a 1.5% decline in EPS over the last year. The share price decline of 60% is actually more than the EPS drop. This suggests the EPS fall has made some shareholders are more nervous about the business. The less favorable sentiment is reflected in its current P/E ratio of 11.39.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on KAR Auction Services'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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for KAR Auction Services the TSR over the last year was 8.7%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that KAR Auction Services has rewarded shareholders with a total shareholder return of 8.7% in the last twelve months. And that does include the dividend. However, the TSR over five years, coming in at 21% per year, is even more impressive. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. Before forming an opinion on KAR Auction Services you might want to consider these 3 valuation metrics.
We will like KAR Auction Services 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 US exchanges.
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.
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.