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It's easy to match the overall market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Latitude Group Holdings Limited (ASX:LFS) have tasted that bitter downside in the last year, as the share price dropped 28%. That's disappointing when you consider the market returned 5.6%. Latitude Group Holdings may have better days ahead, of course; we've only looked at a one year period.
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 Latitude Group Holdings
There is no denying that markets are sometimes efficient, but prices do not always reflect 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.
Even though the Latitude Group Holdings share price is down over the year, its EPS actually improved. It's quite possible that growth expectations may have been unreasonable in the past.
It's surprising to see the share price fall so much, despite the improved EPS. So it's easy to justify a look at some other metrics.
We don't see any weakness in the Latitude Group Holdings' dividend so the steady payout can't really explain the share price drop. From what we can see, revenue is pretty flat, so that doesn't really explain the share price drop. 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).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. You can see what analysts are predicting for Latitude Group Holdings in this interactive graph of future profit estimates.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Latitude Group Holdings, it has a TSR of -22% for the last 1 year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.