As an investor its worth striving to ensure your overall portfolio beats the market average. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term DIC Asset AG (ETR:DIC) shareholders have had that experience, with the share price dropping 50% in three years, versus a market decline of about 6.9%. The more recent news is of little comfort, with the share price down 49% in a year. Shareholders have had an even rougher run lately, with the share price down 26% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
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.
DIC Asset saw its EPS decline at a compound rate of 19% per year, over the last three years. This fall in EPS isn't far from the rate of share price decline, which was 21% per year. So it seems like sentiment towards the stock hasn't changed all that much over time. It seems like the share price is reflecting the declining earnings per share.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on DIC Asset'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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of DIC Asset, it has a TSR of -42% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
While the broader market lost about 14% in the twelve months, DIC Asset shareholders did even worse, losing 46% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 1.7% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Take risks, for example - DIC Asset has 4 warning signs (and 1 which is a bit concerning) we think you should know about.
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 DE 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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