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No-one enjoys it when they lose money on a stock. But it's hard to avoid some disappointing investments when the overall market is down. While the 3U Holding AG (ETR:UUU) share price is down 66% in the last three years, the total return to shareholders (which includes dividends) was -5.6%. And that total return actually beats the market decline of 12%. And the ride hasn't got any smoother in recent times over the last year, with the price 34% lower in that time. The falls have accelerated recently, with the share price down 17% in the last three months.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for 3U Holding
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).
3U Holding saw its EPS decline at a compound rate of 24% per year, over the last three years. This reduction in EPS is slower than the 31% annual reduction in the share price. So it seems the market was too confident about the business, in the past.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, 3U Holding's TSR for the last 3 years was -5.6%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Investors in 3U Holding had a tough year, with a total loss of 32% (including dividends), against a market gain of about 16%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 24% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should learn about the 4 warning signs we've spotted with 3U Holding (including 2 which make us uncomfortable) .