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Investing in stocks inevitably means buying into some companies that perform poorly. But the long term shareholders of Grand City Properties S.A. (ETR:GYC) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 65% drop in the share price over that period. The more recent news is of little comfort, with the share price down 46% in a year. Furthermore, it's down 12% in about a quarter. That's not much fun for holders.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
Check out our latest analysis for Grand City Properties
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Grand City Properties saw its EPS decline at a compound rate of 38% per year, over the last three years. This fall in the EPS is worse than the 30% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Grand City Properties' earnings, revenue and cash flow.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Grand City Properties the TSR over the last 3 years was -60%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Grand City Properties shareholders are down 43% for the year (even including dividends), but the market itself is up 6.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Grand City Properties has 6 warning signs (and 1 which shouldn't be ignored) we think you should know about.