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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. That downside risk was realized by Nordfyns Bank A/S (CPH:NRDF) shareholders over the last year, as the share price declined 31%. That falls noticeably short of the market return of around 11%. At least the damage isn't so bad if you look at the last three years, since the stock is down 10% in that time.
See our latest analysis for Nordfyns Bank
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Unfortunately Nordfyns Bank reported an EPS drop of 58% for the last year. The share price fall of 31% isn't as bad as the reduction in earnings per share. So the market may not be too worried about the EPS figure, at the moment -- or it may have expected earnings to drop faster.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on Nordfyns Bank's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Nordfyns Bank's total shareholder return (TSR) and its 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. Its history of dividend payouts mean that Nordfyns Bank's TSR, which was a 31% drop over the last year, was not as bad as the share price return.
A Different Perspective
Investors in Nordfyns Bank had a tough year, with a total loss of 31%, against a market gain of about 11%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.5% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Before forming an opinion on Nordfyns Bank you might want to consider these 3 valuation metrics.