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We think intelligent long term investing is the way to go. But along the way some stocks are going to perform badly. For example, after five long years the Delfi Limited (SGX:P34) share price is a whole 61% lower. We certainly feel for shareholders who bought near the top. There was little comfort for shareholders in the last week as the price declined a further 3.4%.
View our latest analysis for Delfi
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
Delfi became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.
The modest 1.8% dividend yield is unlikely to be guiding the market view of the stock. It could be that the revenue decline of 5.9% per year is viewed as evidence that Delfi is shrinking. That could explain the weak share price.
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
It is of course excellent to see how Delfi has grown profits over the years, but the future is more important for shareholders. This free interactive report on Delfi’s balance sheet strength is a great place to start, if you want to investigate the stock further.
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 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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Delfi the TSR over the last 5 years was -55%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
The total return of 6.2% received by Delfi shareholders over the last year isn’t far from the market return of -6.0%. Worse still, the company has lost shareholders 15% per year over five years. Generally speaking we’d prefer see an improvement in the fundamental metrics before becoming enthusiastic about the stock. Is Delfi cheap compared to other companies? These 3 valuation measures might help you decide.