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In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term Kendrion N.V. (AMS:KENDR) shareholders have had that experience, with the share price dropping 53% in three years, versus a market decline of about 1.3%.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
See our latest analysis for Kendrion
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 five years of share price growth, Kendrion moved from a loss to profitability. We would usually expect to see the share price rise as a result. So it's worth looking at other metrics to try to understand the share price move.
It's quite likely that the declining dividend has caused some investors to sell their shares, pushing the price lower in the process. It doesn't seem like the changes in revenue would have impacted the share price much, but a closer inspection of the data might reveal something.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. You can see what analysts are predicting for Kendrion in this interactive graph of future profit estimates.
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. In the case of Kendrion, it has a TSR of -47% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Investors in Kendrion had a tough year, with a total loss of 10% (including dividends), against a market gain of about 9.2%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. However, the loss over the last year isn't as bad as the 8% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Kendrion better, we need to consider many other factors. Even so, be aware that Kendrion is showing 4 warning signs in our investment analysis , and 1 of those shouldn't be ignored...