In This Article:
Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
For many investors, the main point of stock picking is to generate higher returns than the overall market. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term Mayne Pharma Group Limited (ASX:MYX) shareholders, since the share price is down 47% in the last three years, falling well short of the market return of around 37%. The good news is that the stock is up 2.9% in the last week.
Check out our latest analysis for Mayne Pharma Group
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Mayne Pharma Group became profitable within the last five years. We would usually expect to see the share price rise as a result. So it's worth looking at other metrics to try to understand the share price move.
We note that, in three years, revenue has actually grown at a 27% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worht worth investigating Mayne Pharma Group further; while we may be missing something on this analysis, there might also be an opportunity.
Depicted in the graphic below, you'll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
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. You can see what analysts are predicting for Mayne Pharma Group in this interactive graph of future profit estimates.
What about the Total Shareholder Return (TSR)?
We've already covered Mayne Pharma Group's share price action, but we should also mention its total shareholder return (TSR). 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. Mayne Pharma Group hasn't been paying dividends, but its TSR of -44% exceeds its share price return of -47%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
While the broader market gained around 8.8% in the last year, Mayne Pharma Group shareholders lost 4.7%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 2.0% over the last half decade. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.