In This Article:
In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the main game is to find enough winners to more than offset the losers So we wouldn't blame long term Topps Tiles Plc (LON:TPT) shareholders for doubting their decision to hold, with the stock down 44% over a half decade. Furthermore, it's down 12% in about a quarter. That's not much fun for holders. But this could be related to the weak market, which is down 5.0% in the same period.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for Topps Tiles
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.
During five years of share price growth, Topps Tiles moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.
The revenue fall of 1.0% per year for five years is neither good nor terrible. But if the market expected durable top line growth, then that could explain the share price weakness.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We know that Topps Tiles has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Topps Tiles' 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. Its history of dividend payouts mean that Topps Tiles' TSR, which was a 33% drop over the last 5 years, was not as bad as the share price return.
A Different Perspective
Investors in Topps Tiles had a tough year, with a total loss of 18%, against a market gain of about 3.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Topps Tiles has 1 warning sign we think you should be aware of.