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Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. For example, the Nordic Group Limited (SGX:MR7) share price is down 34% in the last year. That falls noticeably short of the market decline of around 4.3%. At least the damage isn't so bad if you look at the last three years, since the stock is down 6.3% in that time. Furthermore, it's down 16% in about a quarter. That's not much fun for holders.
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 Nordic Group
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 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.
Unhappily, Nordic Group had to report a 24% decline in EPS over the last year. The share price decline of 34% is actually more than the EPS drop. This suggests the EPS fall has made some shareholders more nervous about the business. The P/E ratio of 7.38 also points to the negative market sentiment.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on Nordic Group's 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Nordic Group's TSR for the last 1 year was -31%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Nordic Group shareholders are down 31% for the year (even including dividends), but the market itself is up 4.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 6% 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 Nordic Group better, we need to consider many other factors. For instance, we've identified 3 warning signs for Nordic Group that you should be aware of.