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Some PCTEL (NASDAQ:PCTI) Shareholders Are Down 42%

Simply Wall St
·4 mins read

For many, the main point of investing is to generate higher returns than the overall market. But the main game is to find enough winners to more than offset the losers So we wouldn't blame long term PCTEL, Inc. (NASDAQ:PCTI) shareholders for doubting their decision to hold, with the stock down 42% over a half decade. The last month has also been disappointing, with the stock slipping a further 43%. We do note, however, that the broader market is down 17% in that period, and this may have weighed on the share price.

View our latest analysis for PCTEL

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During five years of share price growth, PCTEL moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.

We note that the dividend has remained healthy, so that wouldn't really explain the share price drop. It could be that the revenue decline of 4.9% per year is viewed as evidence that PCTEL is shrinking. With revenue weak, and increased payouts of cash, the market might be taking the view that its best days are behind it.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

NasdaqGS:PCTI Income Statement, March 10th 2020
NasdaqGS:PCTI Income Statement, March 10th 2020

We know that PCTEL has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think PCTEL will earn in the future (free profit forecasts).

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for PCTEL the TSR over the last 5 years was -31%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that PCTEL has rewarded shareholders with a total shareholder return of 11% in the last twelve months. That's including the dividend. That certainly beats the loss of about 7.2% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 5 warning signs for PCTEL (1 makes us a bit uncomfortable!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.

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. Thank you for reading.