It's easy to match the overall market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by ALD S.A. (EPA:ALD) shareholders over the last year, as the share price declined 14%. That contrasts poorly with the market return of 4.8%. We wouldn't rush to judgement on ALD because we don't have a long term history to look at. It's up 2.4% in the last seven days.
See our latest analysis for ALD
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.
Unhappily, ALD had to report a 0.7% decline in EPS over the last year. This reduction in EPS is not as bad as the 14% share price fall. So it seems the market was too confident about the business, a year ago. The less favorable sentiment is reflected in its current P/E ratio of 10.08.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of ALD's earnings, revenue and cash flow.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, ALD's TSR for the last year was -9.9%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Given that the market gained 4.8% in the last year, ALD shareholders might be miffed that they lost 9.9% (even including dividends) . However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. It's great to see a nice little 1.5% rebound in the last three months. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). Keeping this in mind, a solid next step might be to take a look at ALD's dividend track record. This free interactive graph is a great place to start.