It's understandable if you feel frustrated when a stock you own sees a lower share price. But sometimes a share price fall can have more to do with market conditions than the performance of the specific business. The Investors Title Company (NASDAQ:ITIC) is down 24% over a year, but the total shareholder return is -17% once you include the dividend. That's better than the market which declined 22% over the last year. However, the longer term returns haven't been so bad, with the stock down 10.0% 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 9.6% in the same time.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
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...' 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.
Unhappily, Investors Title had to report a 36% decline in EPS over the last year. This fall in the EPS is significantly worse than the 24% the share price fall. It may have been that the weak EPS was not as bad as some had feared.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Investors Title's key metrics by checking this interactive graph of Investors Title's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Investors Title's TSR for the last 1 year was -17%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Although it hurts that Investors Title returned a loss of 17% in the last twelve months, the broader market was actually worse, returning a loss of 22%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 2% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. It's always interesting to track share price performance over the longer term. But to understand Investors Title better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Investors Title you should be aware of.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.
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