In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Pressman Advertising Limited (NSE:PRESSMN) shareholders have had that experience, with the share price dropping 53% in three years, versus a market return of about 14%. And over the last year the share price fell 50%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 23% in the last three months.
Check out our latest analysis for Pressman Advertising
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
During the unfortunate three years of share price decline, Pressman Advertising actually saw its earnings per share (EPS) improve by 11% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
We note that the dividend seems healthy enough, so that probably doesn't explain the share price drop. However, the weak share price might be related to the fact revenue has been disappearing at a rate of 4.1% each year, over three years. This could have some investors worried about the longer term growth potential (or lack thereof).
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
If you are thinking of buying or selling Pressman Advertising stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Pressman Advertising, it has a TSR of -47% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!