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It's nice to see the 1000mercis (EPA:ALMIL) share price up 16% in a week. But over the last half decade, the stock has not performed well. In fact, the share price is down 48%, which falls well short of the return you could get by buying an index fund.
See our latest analysis for 1000mercis
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. 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.
During the five years over which the share price declined, 1000mercis's earnings per share (EPS) dropped by 5.5% each year. This reduction in EPS is less than the 12% annual reduction in the share price. This implies that the market is more cautious about the business these days.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It might be well worthwhile taking a look at our free report on 1000mercis's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, 1000mercis's TSR for the last 5 years was -43%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
While the broader market gained around 0.7% in the last year, 1000mercis shareholders lost 23% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% over the last half decade. We realise that Buffett 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 businesses. Is 1000mercis cheap compared to other companies? These 3 valuation measures might help you decide.