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Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the Trinseo S.A. (NYSE:TSE) share price is down 42% in the last year. That contrasts poorly with the market return of 10%. At least the damage isn't so bad if you look at the last three years, since the stock is down 4.9% in that time. The falls have accelerated recently, with the share price down 16% in the last three months.
View our latest analysis for Trinseo
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 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.
Unfortunately Trinseo reported an EPS drop of 8.8% for the last year. This reduction in EPS is not as bad as the 42% share price fall. So it seems the market was too confident about the business, a year ago. The less favorable sentiment is reflected in its current P/E ratio of 6.17.
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. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Trinseo's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Trinseo shareholders, and that cash payout explains why its total shareholder loss of 41%, over the last year, isn't as bad as the share price return.
A Different Perspective
The last twelve months weren't great for Trinseo shares, which cost holders 41%, including dividends, while the market was up about 10%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Fortunately the longer term story is brighter, with total returns averaging about 0.7% per year over three years. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Trinseo by clicking this link.