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Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the oOh!media Limited (ASX:OML) share price slid 46% over twelve months. That's disappointing when you consider the market returned 9.1%. Even if you look out three years, the returns are still disappointing, with the share price down (the share price is down 44%) in that time. Furthermore, it's down 33% in about a quarter. That's not much fun for holders.
See our latest analysis for oOh!media
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Unfortunately oOh!media reported an EPS drop of 53% for the last year. This proportional reduction in earnings per share isn't far from the 46% decrease in the share price. Therefore one could posit that the market has not become more concerned about the company, despite the lower EPS. Rather, the share price has approximately tracked EPS growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on oOh!media's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between oOh!media's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. oOh!media's TSR of was a loss of 44% for the year. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
oOh!media shareholders are down 44% for the year (even including dividends) , but the broader market is up 9.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The three-year loss of 14% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.