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The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the Nokian Renkaat Oyj (HEL:TYRES) share price slid 25% over twelve months. That falls noticeably short of the market return of around 2.3%. At least the damage isn't so bad if you look at the last three years, since the stock is down 17% in that time. It's up 3.7% in the last seven days.
View our latest analysis for Nokian Renkaat Oyj
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.
Even though the Nokian Renkaat Oyj share price is down over the year, its EPS actually improved. It's quite possible that growth expectations may have been unreasonable in the past. The divergence between the EPS and the share price is quite notable, during the year. But we might find some different metrics explain the share price movements better.
We don't see any weakness in the Nokian Renkaat Oyj's dividend so the steady payout can't really explain the share price drop. The revenue trend doesn't seem to explain why the share price is down. Unless, of course, the market was expecting a revenue uptick.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Nokian Renkaat Oyj is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Nokian Renkaat Oyj in this interactive graph of future profit estimates.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Nokian Renkaat Oyj, it has a TSR of -21% for the last year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Nokian Renkaat Oyj shareholders are down 21% for the year (even including dividends), but the market itself is up 2.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 5.7% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Importantly, we haven't analysed Nokian Renkaat Oyj's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.