Ideally, your overall portfolio should beat the market average. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn’t blame long term Brimstone Investment Corporation Limited (JSE:BRT) shareholders for doubting their decision to hold, with the stock down 32% over a half decade. Furthermore, it’s down 14% in about a quarter. That’s not much fun for holders.
Now let’s have a look at the company’s fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for Brimstone Investment
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.
In the last half decade Brimstone Investment saw its share price fall as its EPS declined below zero. The recent extraordinary items contributed to this situation. Since the company has fallen to a loss making position, it’s hard to compare the change in EPS with the share price change. But we would generally expect a lower price, given the situation.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It might be well worthwhile taking a look at our free report on Brimstone Investment’s earnings, revenue and cash flow.
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Brimstone Investment, it has a TSR of -19% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
Brimstone Investment provided a TSR of 19% over the year (including dividends). That’s fairly close to the broader market return. To take a positive view, the gain is pleasing, and it sure beats annualized TSR loss of 3%, which was endured over half a decade. We’re pretty skeptical of turnaround stories, but it’s good to see the recent share price recovery. 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. Like risks, for instance. Every company has them, and we’ve spotted 4 warning signs for Brimstone Investment (of which 2 are a bit unpleasant!) you should know about.
