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It is doubtless a positive to see that the B&M European Value Retail S.A. (LON:BME) share price has gained some 34% in the last three months. But that doesn't change the fact that the returns over the last year have been less than pleasing. After all, the share price is down 35% in the last year, significantly under-performing the market.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
See our latest analysis for B&M European Value Retail
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 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).
Unhappily, B&M European Value Retail had to report a 10% decline in EPS over the last year. This reduction in EPS is not as bad as the 35% share price fall. This suggests the EPS fall has made some shareholders are more nervous about the business. The P/E ratio of 10.59 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).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on B&M European Value Retail's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, B&M European Value Retail's TSR for the last 1 year was -32%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We regret to report that B&M European Value Retail shareholders are down 32% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 5.8%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. 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 B&M European Value Retail better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with B&M European Value Retail (including 1 which is concerning) .