The truth is that if you invest for long enough, you're going to end up with some losing stocks. But the long term shareholders of Leonteq AG (VTX:LEON) have had an unfortunate run in the last three years. Unfortunately, they have held through a 72% decline in the share price in that time. And more recent buyers are having a tough time too, with a drop of 40% in the last year. The falls have accelerated recently, with the share price down 23% in the last three months.
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 Leonteq
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Leonteq saw its EPS decline at a compound rate of 58% per year, over the last three years. This fall in the EPS is worse than the 34% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in. This positive sentiment is also reflected in the generous P/E ratio of 46.81.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Leonteq'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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Leonteq, it has a TSR of -67% 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!
A Different Perspective
Investors in Leonteq had a tough year, with a total loss of 38% (including dividends), against a market gain of about 3.8%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Leonteq better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 5 warning signs for Leonteq (of which 2 are potentially serious!) you should know about.