Want to participate in a research study? Help shape the future of investing tools and earn a $60 gift card!
Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Diamond Hill Investment Group, Inc. (NASDAQ:DHIL) have tasted that bitter downside in the last year, as the share price dropped 27%. That's well bellow the market return of 11%. However, the longer term returns haven't been so bad, with the stock down 12% in the last three years. The silver lining is that the stock is up 4.6% in about a week.
There is no denying that markets are sometimes efficient, but prices do not always reflect 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.
Unfortunately Diamond Hill Investment Group reported an EPS drop of 6.9% for the last year. This reduction in EPS is not as bad as the 27% share price fall. So it seems the market was too confident about the business, a year ago. The P/E ratio of 10.86 also points to the negative market sentiment.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Diamond Hill Investment Group's key metrics by checking this interactive graph of Diamond Hill Investment Group'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. We note that for Diamond Hill Investment Group the TSR over the last year was -24%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
While the broader market gained around 11% in the last year, Diamond Hill Investment Group shareholders lost 24% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 8.0% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. If you would like to research Diamond Hill Investment Group in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
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 US exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.