One simple way to benefit from a rising market is to buy an index fund. But in any given year a good portion of stocks will fall short of that. That's what happened in the case of Propel Funeral Partners Limited (ASX:PFP): its share price dropped 12% while the market declined 8.7%. We wouldn't rush to judgement on Propel Funeral Partners because we don't have a long term history to look at. There was little comfort for shareholders in the last week as the price declined a further 3.9%.
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Unfortunately Propel Funeral Partners reported an EPS drop of 21% for the last year. This fall in the EPS is significantly worse than the 12% the share price fall. It may have been that the weak EPS was not as bad as some had feared.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Propel Funeral Partners's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. In the case of Propel Funeral Partners, it has a TSR of -9.0% for the last year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Propel Funeral Partners shareholders are down 9.0% over twelve months (even including dividends) . That's reasonably close to the the market return of -8.7%. However, shareholders can take a little comfort that the share price is up 6.6% over the last three months. With any luck the business can produce the financial results required to maintain the positive share price momentum. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Propel Funeral Partners has 2 warning signs we think 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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