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The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Bytes Technology Group plc (LON:BYIT) have tasted that bitter downside in the last year, as the share price dropped 21%. That falls noticeably short of the market decline of around 1.7%. We wouldn't rush to judgement on Bytes Technology Group because we don't have a long term history to look at. On the other hand the share price has bounced 8.8% over the last week.
While the stock has risen 8.8% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
Check out our latest analysis for Bytes Technology Group
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.
During the unfortunate twelve months during which the Bytes Technology Group share price fell, it actually saw its earnings per share (EPS) improve by 58%. Of course, the situation might betray previous over-optimism about growth.
It's fair to say that the share price does not seem to be reflecting the EPS growth. So it's well worth checking out some other metrics, too.
Given the yield is quite low, at 1.7%, we doubt the dividend can shed much light on the share price. Bytes Technology Group managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So it makes a lot of sense to check out what analysts think Bytes Technology Group will earn in the future (free profit 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Bytes Technology Group, it has a TSR of -19% for the last 1 year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!