How Much Did VGI Partners'(ASX:VGI) Shareholders Earn From Share Price Movements Over The Last Year?
It's easy to match the overall market return by buying 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 VGI Partners Limited (ASX:VGI) share price is down 31% in the last year. That contrasts poorly with the market return of 41%. Because VGI Partners hasn't been listed for many years, the market is still learning about how the business performs. Shareholders have had an even rougher run lately, with the share price down 14% in the last 90 days.
View our latest analysis for VGI Partners
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).
Unfortunately VGI Partners reported an EPS drop of 18% for the last year. This reduction in EPS is not as bad as the 31% share price fall. This suggests the EPS fall has made some shareholders are more nervous about the business.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, VGI Partners' TSR for the last year was -29%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
While VGI Partners shareholders are down 29% for the year (even including dividends), the market itself is up 41%. While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. The share price decline has continued throughout the most recent three months, down 14%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. It's always interesting to track share price performance over the longer term. But to understand VGI Partners better, we need to consider many other factors. For instance, we've identified 2 warning signs for VGI Partners that you should be aware of.
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 AU 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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