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Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Aalberts N.V. (AMS:AALB) shareholders have had that experience, with the share price dropping 42% in three years, versus a market return of about 14%. And the ride hasn't got any smoother in recent times over the last year, with the price 40% lower in that time. Unfortunately the share price momentum is still quite negative, with prices down 21% in thirty days. We do note, however, that the broader market is down 8.6% in that period, and this may have weighed on the share price.
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.
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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).
Aalberts saw its EPS decline at a compound rate of 21% per year, over the last three years. In comparison the 17% compound annual share price decline isn't as bad as the EPS drop-off. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
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. Dive deeper into the earnings by checking this interactive graph of Aalberts' 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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Aalberts the TSR over the last 3 years was -34%, 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!