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Volatility 101: Should CanWel Building Materials Group (TSE:CWX) Shares Have Dropped 28%?

Simply Wall St

While it may not be enough for some shareholders, we think it is good to see the CanWel Building Materials Group Ltd. (TSE:CWX) share price up 11% in a single quarter. But that is minimal compensation for the share price under-performance over the last year. In fact, the price has declined 28% in a year, falling short of the returns you could get by investing in an index fund.

View our latest analysis for CanWel Building Materials Group

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.

Unhappily, CanWel Building Materials Group had to report a 8.5% decline in EPS over the last year. The share price decline of 28% is actually more than the EPS drop. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

TSX:CWX Past and Future Earnings, March 14th 2019

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on CanWel Building Materials Group’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, CanWel Building Materials Group’s TSR for the last year was -21%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market gained around 3.5% in the last year, CanWel Building Materials Group shareholders lost 21% (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 6.2% 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. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of CanWel Building Materials Group by clicking this link.

CanWel Building Materials Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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 editorial-team@simplywallst.com. 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.