Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Peoplein Limited (ASX:PPE) have tasted that bitter downside in the last year, as the share price dropped 16%. That falls noticeably short of the market decline of around 4.5%. At least the damage isn't so bad if you look at the last three years, since the stock is down 1.1% in that time. And the share price decline continued over the last week, dropping some 6.5%.
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.
Check out our latest analysis for Peoplein
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
Unfortunately Peoplein reported an EPS drop of 3.5% for the last year. The share price decline of 16% is actually more than the EPS drop. So it seems the market was too confident about the business, a year ago.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Peoplein's TSR for the last 1 year was -13%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Peoplein shareholders are down 13% for the year (even including dividends), falling short of the market return. The market shed around 4.5%, no doubt weighing on the stock price. Fortunately the longer term story is brighter, with total returns averaging about 2.7% per year over three years. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. It's always interesting to track share price performance over the longer term. But to understand Peoplein better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for Peoplein you should be aware of.