In This Article:
Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Flowtech Fluidpower plc (LON:FLO) have tasted that bitter downside in the last year, as the share price dropped 23%. That contrasts poorly with the market return of 4.8%. However, the longer term returns haven't been so bad, with the stock down 2.6% in the last three years. The good news is that the stock is up 3.0% in the last week.
View our latest analysis for Flowtech Fluidpower
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.
Unhappily, Flowtech Fluidpower had to report a 14% decline in EPS over the last year. The share price decline of 23% is actually more than the EPS drop. This suggests the EPS fall has made some shareholders are more nervous about the business.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Flowtech Fluidpower's TSR for the last year was -19%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While the broader market gained around 4.8% in the last year, Flowtech Fluidpower shareholders lost 19% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 4.2% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Flowtech Fluidpower by clicking this link.