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Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Doro AB (publ) (STO:DORO) shareholders have had that experience, with the share price dropping 46% in three years, versus a market return of about 30%.
See our latest analysis for Doro
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Although the share price is down over three years, Doro actually managed to grow EPS by 12% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed. It’s worth taking a look at other metrics, because the EPS growth doesn’t seem to match with the falling share price.
The company has kept revenue pretty healthy over the last three years, so we doubt that explains the falling share price. We’re not entirely sure why the share price is dropped, but it does seem likely investors have become less optimistic about the business.
The graphic below shows how revenue and earnings have changed as management guided the business forward. If you want to see cashflow, you can click on the chart.
We know that Doro has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Doro will earn in the future (free profit forecasts)
What about the Total Shareholder Return (TSR)?
We’ve already covered Doro’s share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) and any discounted capital raisings offered to shareholders. Its history of dividend payouts mean that Doro’s TSR, which was a 45% drop over the last 3 years, was not as bad as the share price return.
A Different Perspective
Doro shareholders are down 14% for the year, but the market itself is up 7.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 3.2% per year over five years. We realise that Buffett has said investors should ‘buy when there is blood on the streets’, but we caution that investors should first be sure they are buying a high quality businesses. 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.