If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term Cancom SE (ETR:COK) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 60% drop in the share price over that period. Furthermore, it’s down 20% in about a quarter. That’s not much fun for holders.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they’ve been consistent with returns.
View our latest analysis for Cancom
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Although the share price is down over three years, Cancom actually managed to grow EPS by 2.5% 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.
After considering the numbers, we’d posit that the the market had higher expectations of EPS growth, three years back. Looking to other metrics might better explain the share price change.
We note that the dividend seems healthy enough, so that probably doesn’t explain the share price drop. It’s good to see that Cancom has increased its revenue over the last three years. But it’s not clear to us why the share price is down. It might be worth diving deeper into the fundamentals, lest an opportunity goes begging.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We know that Cancom has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Cancom
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Cancom the TSR over the last 3 years was -56%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
