The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by IFA Hotel & Touristik Aktiengesellschaft (FRA:IFA) shareholders over the last year, as the share price declined 36%. That's disappointing when you consider the market returned -7.3%. On the other hand, the stock is actually up 17% over three years. Unhappily, the share price slid 2.7% in the last week.
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Check out our latest analysis for IFA Hotel & Touristik
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Unfortunately IFA Hotel & Touristik reported an EPS drop of 38% for the last year. We note that the 36% share price drop is very close to the EPS drop. So it seems that the market sentiment has not changed much, despite the weak results. Rather, the share price has approximately tracked EPS growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into IFA Hotel & Touristik's key metrics by checking this interactive graph of IFA Hotel & Touristik's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We've already covered IFA Hotel & Touristik's share price action, but we should also mention its total shareholder return (TSR). 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 and spin-offs. Dividends have been really beneficial for IFA Hotel & Touristik shareholders, and that cash payout explains why its total shareholder loss of 35%, over the last year, isn't as bad as the share price return.
A Different Perspective
While the broader market lost about 7.3% in the twelve months, IFA Hotel & Touristik shareholders did even worse, losing 35% (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. On the bright side, long term shareholders have made money, with a gain of 0.8% 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.