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Volatility 101: Should Safeland (LON:SAF) Shares Have Dropped 35%?

Simply Wall St

The simplest way to benefit from a rising market is to buy an index fund. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Safeland plc (LON:SAF) share price slid 35% over twelve months. That's disappointing when you consider the market returned -2.1%. Even if you look out three years, the returns are still disappointing, with the share price down (the share price is down 31%) in that time. There was little comfort for shareholders in the last week as the price declined a further 12%.

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View our latest analysis for Safeland

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

Unfortunately Safeland reported an EPS drop of 22% for the last year. This reduction in EPS is not as bad as the 35% share price fall. So it seems the market was too confident about the business, a year ago. The less favorable sentiment is reflected in its current P/E ratio of 2.96.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

AIM:SAF Past and Future Earnings, May 21st 2019
AIM:SAF Past and Future Earnings, May 21st 2019

This free interactive report on Safeland's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Safeland's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Safeland's TSR, which was a 33% drop over the last year, was not as bad as the share price return.

A Different Perspective

While the broader market lost about 2.1% in the twelve months, Safeland shareholders did even worse, losing 33% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 4.5% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. You could get a better understanding of Safeland's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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.