Reflecting on Downer EDI's (ASX:DOW) Share Price Returns Over The Last Year
It's easy to match the overall market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Downer EDI Limited (ASX:DOW) have tasted that bitter downside in the last year, as the share price dropped 48%. That contrasts poorly with the market decline of 7.2%. Notably, shareholders had a tough run over the longer term, too, with a drop of 36% in the last three years. Furthermore, it's down 10% in about a quarter. That's not much fun for holders.
View our latest analysis for Downer EDI
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
Downer EDI fell to a loss making position during the year. Buyers no doubt think it's a temporary situation, but those with a nose for quality have low tolerance for losses. We hope for shareholders' sake that the company becomes profitable again soon.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Downer EDI's key metrics by checking this interactive graph of Downer EDI's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Downer EDI's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Downer EDI's TSR, which was a 46% drop over the last year, was not as bad as the share price return.
A Different Perspective
While the broader market lost about 7.2% in the twelve months, Downer EDI shareholders did even worse, losing 46%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 8.4%, 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 Downer EDI better, we need to consider many other factors. For instance, we've identified 2 warning signs for Downer EDI (1 is potentially serious) that you should be aware of.
We will like Downer EDI better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.
