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The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. Unfortunately the Octopus Renewables Infrastructure Trust plc (LON:ORIT) share price slid 10% over twelve months. That's well below the market decline of 1.5%. Looking at the longer term, the stock is down 9.5% over three years.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
View our latest analysis for Octopus Renewables Infrastructure Trust
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. 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 unfortunate twelve months during which the Octopus Renewables Infrastructure Trust share price fell, it actually saw its earnings per share (EPS) improve by 372%. It could be that the share price was previously over-hyped.
The divergence between the EPS and the share price is quite notable, during the year. So it's easy to justify a look at some other metrics.
We don't see any weakness in the Octopus Renewables Infrastructure Trust's dividend so the steady payout can't really explain the share price drop. The revenue trend doesn't seem to explain why the share price is down. Of course, it could simply be that it simply fell short of the market consensus expectations.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Take a more thorough look at Octopus Renewables Infrastructure Trust's financial health with this free report on its balance sheet.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Octopus Renewables Infrastructure Trust the TSR over the last 1 year was -5.7%, 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!