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For many, the main point of investing is to generate higher returns than the overall market. But even the best stock picker will only win with some selections. So we wouldn't blame long term JSE Limited (JSE:JSE) shareholders for doubting their decision to hold, with the stock down 51% over a half decade. Shareholders have had an even rougher run lately, with the share price down 20% in the last 90 days.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out our latest analysis for JSE
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Looking back five years, both JSE's share price and EPS declined; the latter at a rate of 2.7% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 13% per year, over the period. This implies that the market is more cautious about the business these days. The low P/E ratio of 10.82 further reflects this reticence.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Dive deeper into JSE's key metrics by checking this interactive graph of JSE's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for JSE the TSR over the last 5 years was -37%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
JSE shareholders are down 3.6% for the year (even including dividends), but the market itself is up 6.8%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 6% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand JSE better, we need to consider many other factors. Take risks, for example - JSE has 2 warning signs (and 1 which is a bit concerning) we think you should know about.