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We think intelligent long term investing is the way to go. But that doesn’t mean long term investors can avoid big losses. Zooming in on an example, the Saunders International Limited (ASX:SND) share price dropped 64% in the last half decade. That’s not a lot of fun for true believers. We also note that the stock has performed poorly over the last year, with the share price down 47%. Furthermore, it’s down 17% in about a quarter. That’s not much fun for holders. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
Check out our latest analysis for Saunders International
There is no denying that markets are sometimes efficient, but prices do not always reflect 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.
In the last half decade Saunders International saw its share price fall as its EPS declined below zero. At present it’s hard to make valid comparisons between EPS and the share price. However, we can say we’d expect to see a falling share price in this scenario.
The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It’s probably worth noting we’ve seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. It might be well worthwhile taking a look at our free report on Saunders International’s earnings, revenue and cash flow.
A Dividend Lost
The value of past dividends are accounted for in the total shareholder return (TSR), but not in the share price return mentioned above. Many would argue the TSR gives a more complete picture of the value a stock brings to its holders. Over the last 5 years, Saunders International generated a TSR of -53%, which is, of course, better than the share price return. Even though the company isn’t paying dividends at the moment, it has done in the past.
A Different Perspective
Saunders International shareholders are down 47% for the year, but the market itself is up 9.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 14% per year over five years. 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. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares – and the price they paid.