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As an investor its worth striving to ensure your overall portfolio beats the market average. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term Michelmersh Brick Holdings plc (LON:MBH) shareholders have had that experience, with the share price dropping 23% in three years, versus a market return of about 20%.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for Michelmersh Brick Holdings
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the unfortunate three years of share price decline, Michelmersh Brick Holdings actually saw its earnings per share (EPS) improve by 26% 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). Or else the company was over-hyped in the past, and so its growth has disappointed.
It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.
We note that the dividend seems healthy enough, so that probably doesn't explain the share price drop. We like that Michelmersh Brick Holdings has actually grown its revenue over the last three years. But it's not clear to us why the share price is down. It might be worth diving deeper into the fundamentals, lest an opportunity goes begging.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that Michelmersh Brick Holdings has improved its bottom line lately, but what does the future have in store? This free report showing analyst forecasts should help you form a view on Michelmersh Brick Holdings
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Michelmersh Brick Holdings the TSR over the last 3 years was -14%, 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!