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It's easy to match the overall market return by buying 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 Prosegur Cash, S.A. (BME:CASH) shareholders over the last year, as the share price declined 27%. That's well bellow the market return of 1.5%. Because Prosegur Cash hasn't been listed for many years, the market is still learning about how the business performs. Even worse, it's down 27% in about a month, which isn't fun at all.
View our latest analysis for Prosegur Cash
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Unhappily, Prosegur Cash had to report a 36% decline in EPS over the last year. This fall in the EPS is significantly worse than the 27% the share price fall. It may have been that the weak EPS was not as bad as some had feared.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It might be well worthwhile taking a look at our free report on Prosegur Cash's earnings, revenue and cash flow.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Prosegur Cash the TSR over the last year was -25%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Given that the market gained 1.5% in the last year, Prosegur Cash shareholders might be miffed that they lost 25% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. The share price decline has continued throughout the most recent three months, down 18%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Before forming an opinion on Prosegur Cash you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.