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It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by Napier Port Holdings Limited (NZSE:NPH) shareholders over the last year, as the share price declined 16%. That falls noticeably short of the market decline of around 11%. Napier Port Holdings may have better days ahead, of course; we've only looked at a one year period.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Even though the Napier Port Holdings share price is down over the year, its EPS actually improved. It's quite possible that growth expectations may have been unreasonable in the past.
By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, last year. But other metrics might shed some light on why the share price is down.
Napier Port Holdings' revenue is actually up 6.8% over the last year. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
If you are thinking of buying or selling Napier Port Holdings stock, you should check out this FREE detailed report on its balance sheet.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Napier Port Holdings the TSR over the last 1 year was -13%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We doubt Napier Port Holdings shareholders are happy with the loss of 13% over twelve months (even including dividends). That falls short of the market, which lost 11%. There's no doubt that's a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 3.8%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we'd remain pretty wary until we see some strong business performance. 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. Case in point: We've spotted 2 warning signs for Napier Port Holdings you should be aware of, and 1 of them is potentially serious.
Of course Napier Port Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on NZ 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.
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