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Investors can approximate the average market return by buying an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. For example, the CML Microsystems plc (LON:CML) share price is down 30% in the last year. That contrasts poorly with the market return of 16%. Looking at the longer term, the stock is down 25% over three years. Shareholders have had an even rougher run lately, with the share price down 21% in the last 90 days.
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.
View our latest analysis for CML Microsystems
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. 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.
Unfortunately CML Microsystems reported an EPS drop of 57% for the last year. This fall in the EPS is significantly worse than the 30% the share price fall. It may have been that the weak EPS was not as bad as some had feared.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that CML Microsystems has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of CML Microsystems, it has a TSR of -28% for the last 1 year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
CML Microsystems shareholders are down 28% for the year (even including dividends), but the market itself is up 16%. 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. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand CML Microsystems better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 4 warning signs for CML Microsystems you should know about.