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Ideally, your overall portfolio should beat the market average. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in PayPoint plc (LON:PAY), since the last five years saw the share price fall 43%. The falls have accelerated recently, with the share price down 16% in the last three months.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
View our latest analysis for PayPoint
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).
While the share price declined over five years, PayPoint actually managed to increase EPS by an average of 3.1% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.
Based on these numbers, we'd venture that the market may have been over-optimistic about forecast growth, half a decade ago. Looking to other metrics might better explain the share price change.
We note that the dividend has fallen in the last five years, so that may have contributed to the share price decline. The revenue decline of about 12% per year might also encourage sellers.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
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. So we recommend checking out this free report showing consensus forecasts
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, PayPoint's TSR for the last 5 years was -18%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.