The past three years for Mercer International (NASDAQ:MERC) investors has not been profitable
Mercer International Inc. (NASDAQ:MERC) shareholders should be happy to see the share price up 15% in the last quarter. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 16% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for Mercer International
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).
During five years of share price growth, Mercer International moved from a loss to profitability. We would usually expect to see the share price rise as a result. So given the share price is down it's worth checking some other metrics too.
With revenue flat over three years, it seems unlikely that the share price is reflecting the top line. We're not entirely sure why the share price is dropped, but it does seem likely investors have become less optimistic about the business.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So it makes a lot of sense to check out what analysts think Mercer International will earn in the future (free profit forecasts).
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Mercer International's TSR for the last 3 years was -6.9%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Mercer International shareholders gained a total return of 4.5% during the year. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 3% over half a decade This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Mercer International better, we need to consider many other factors. Even so, be aware that Mercer International is showing 2 warning signs in our investment analysis , and 1 of those shouldn't be ignored...
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
