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Many investors define successful investing as beating the market average over the long term. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Mountview Estates P.L.C. (LON:MTVW) shareholders have had that experience, with the share price dropping 35% in three years, versus a market decline of about 12%.
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 Mountview Estates
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 three years that the share price fell, Mountview Estates' earnings per share (EPS) dropped by 2.7% each year. This reduction in EPS is slower than the 13% annual reduction in the share price. So it seems the market was too confident about the business, in the past.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on Mountview Estates' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Mountview Estates, it has a TSR of -22% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Investors in Mountview Estates had a tough year, with a total loss of 8.7% (including dividends), against a market gain of about 10%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 0.2% per year over half a decade. It could be that the recent sell-off is an opportunity, 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 Mountview Estates better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Mountview Estates you should be aware of, and 1 of them is concerning.