NN Group (AMS:NN) investors are sitting on a loss of 17% if they invested a year ago
The simplest way to benefit from a rising market is to buy an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in NN Group N.V. (AMS:NN) have tasted that bitter downside in the last year, as the share price dropped 23%. That's well below the market return of 9.5%. However, the longer term returns haven't been so bad, with the stock down 6.4% in the last three years. Unfortunately the share price momentum is still quite negative, with prices down 12% in thirty days. But this could be related to poor market conditions -- stocks are down 6.3% in the same time.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for NN Group
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Unhappily, NN Group had to report a 84% decline in EPS over the last year. This fall in the EPS is significantly worse than the 23% the share price fall. It may have been that the weak EPS was not as bad as some had feared.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for NN Group the TSR over the last 1 year was -17%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
While the broader market gained around 9.5% in the last year, NN Group shareholders lost 17% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 3%, 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 NN Group better, we need to consider many other factors. Even so, be aware that NN Group is showing 3 warning signs in our investment analysis , and 1 of those is a bit unpleasant...
But note: NN Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Dutch exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
