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While not a mind-blowing move, it is good to see that the NWF Group plc (LON:NWF) share price has gained 11% in the last three months. But that cannot eclipse the less-than-impressive returns over the last three years. In fact, the share price is down 24% in the last three years, falling well short of the market return.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the unfortunate three years of share price decline, NWF Group actually saw its earnings per share (EPS) improve by 99% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.
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.
We note that the dividend seems healthy enough, so that probably doesn't explain the share price drop. It's good to see that NWF Group has increased 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.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We know that NWF Group has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on NWF Group's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 NWF Group, it has a TSR of -15% 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!