Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Ideally, your overall portfolio should beat the market average. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term Ultra Electronics Holdings plc (LON:ULE) shareholders for doubting their decision to hold, with the stock down 15% over a half decade. It's up 2.2% in the last seven days.
Check out our latest analysis for Ultra Electronics Holdings
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
Looking back five years, both Ultra Electronics Holdings's share price and EPS declined; the latter at a rate of 4.5% per year. This fall in the EPS is worse than the 3.1% compound annual share price fall. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
This free interactive report on Ultra Electronics Holdings's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Ultra Electronics Holdings, it has a TSR of -1.6% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that Ultra Electronics Holdings shareholders have received a total shareholder return of 6.2% over the last year. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 0.3% per year over five years. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.