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For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term TBC Bank Group PLC (LON:TBCG) shareholders have had that experience, with the share price dropping 51% in three years, versus a market decline of about 7.7%. The more recent news is of little comfort, with the share price down 40% in a year. Even worse, it's down 11% in about a month, which isn't fun at all.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Although the share price is down over three years, TBC Bank Group actually managed to grow EPS by 14% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or else the company was over-hyped in the past, and so its growth has disappointed.
It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.
Revenue is actually up 12% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating TBC Bank Group further; while we may be missing something on this analysis, there might also be an opportunity.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We know that TBC Bank Group has improved its bottom line lately, but what does the future have in store? If you are thinking of buying or selling TBC Bank Group stock, you should check out this free report showing analyst profit forecasts.
What about the Total Shareholder Return (TSR)?
We've already covered TBC Bank Group's share price action, but we should also mention its total shareholder return (TSR). 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. TBC Bank Group's TSR of was a loss of 48% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
TBC Bank Group shareholders are down 40% for the year, falling short of the market return. The market shed around 8.4%, no doubt weighing on the stock price. Shareholders have lost 14% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. 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. Take risks, for example - TBC Bank Group has 1 warning sign we think you should be aware of.
But note: TBC Bank Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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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