In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term Briscoe Group Limited (NZSE:BGP) shareholders, since the share price is down 17% in the last three years, falling well short of the market return of around 41%. It's up 1.2% in the last seven days.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).
During the unfortunate three years of share price decline, Briscoe Group actually saw its earnings per share (EPS) improve by 1.2% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.
It looks to us like the market was probably too optimistic around growth three years ago. However, taking a look at other business metrics might shed a bit more light on the share price action.
We note that, in three years, revenue has actually grown at a 3.8% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Briscoe Group more closely, as sometimes stocks fall unfairly. This could present an opportunity.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. You can see what analysts are predicting for Briscoe Group in this interactive graph of future profit estimates.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Briscoe Group's total shareholder return (TSR) and its share price change, which we've covered above. 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. Briscoe Group's TSR of was a loss of 2.6% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
Investors in Briscoe Group had a tough year, with a total loss of 0.5%, against a market gain of about 4.0%. 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 8.6%, 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. It's always interesting to track share price performance over the longer term. But to understand Briscoe Group better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Briscoe Group .
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NZ exchanges.
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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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