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 Vetropack Holding AG (VTX:VETN) shareholders have had that experience, with the share price dropping 34% in three years, versus a market decline of about 8.8%. Furthermore, it's down 11% in about a quarter. That's not much fun for holders.
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 Vetropack Holding
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. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the unfortunate three years of share price decline, Vetropack Holding actually saw its earnings per share (EPS) improve by 7.8% 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.
Revenue is actually up 13% over the three years, so the share price drop doesn't seem to hinge on revenue, either. It's probably worth investigating Vetropack Holding further; while we may be missing something on this analysis, there might also be an opportunity.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that Vetropack Holding has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Vetropack Holding 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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Vetropack Holding, it has a TSR of -29% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!