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Ideally, your overall portfolio should beat the market average. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Forterra plc (LON:FORT), since the last five years saw the share price fall 39%.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
View our latest analysis for Forterra
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.
During the five years over which the share price declined, Forterra's earnings per share (EPS) dropped by 32% each year. The share price decline of 9% per year isn't as bad as the EPS decline. The relatively muted share price reaction might be because the market expects the business to turn around.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Forterra's key metrics by checking this interactive graph of Forterra's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Forterra the TSR over the last 5 years was -30%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Forterra shareholders gained a total return of 8.2% during the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 5% endured over half a decade. So this might be a sign the business has turned its fortunes around. It's always interesting to track share price performance over the longer term. But to understand Forterra better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Forterra (of which 1 can't be ignored!) you should know about.