Adval Tech Holding (VTX:ADVN) shareholders have endured a 35% loss from investing in the stock five years ago
For many, the main point of investing is to generate higher returns than the overall market. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term Adval Tech Holding AG (VTX:ADVN) shareholders for doubting their decision to hold, with the stock down 40% over a half decade. Contrary to the longer term story, the last month has been good for stockholders, with a share price gain of 10.0%.
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It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
Check out our latest analysis for Adval Tech Holding
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.
During the five years over which the share price declined, Adval Tech Holding's earnings per share (EPS) dropped by 48% each year. This fall in the EPS is worse than the 10% compound annual share price fall. The relatively muted share price reaction might be because the market expects the business to turn around. With a P/E ratio of 66.36, it's fair to say the market sees a brighter future for the business.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
This free interactive report on Adval Tech Holding's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Adval Tech Holding the TSR over the last 5 years was -35%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
While it's certainly disappointing to see that Adval Tech Holding shares lost 13% throughout the year, that wasn't as bad as the market loss of 17%. Given the total loss of 6% per year over five years, it seems returns have deteriorated in the last twelve months. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 2 warning signs for Adval Tech Holding (1 is concerning!) that you should be aware of before investing here.