Ideally, your overall portfolio should beat the market average. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term MyState Limited (ASX:MYS) shareholders for doubting their decision to hold, with the stock down 31% over a half decade. We also note that the stock has performed poorly over the last year, with the share price down 29%. Furthermore, it's down 14% in about a quarter. That's not much fun for holders.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for MyState
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Looking back five years, both MyState's share price and EPS declined; the latter at a rate of 1.2% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 7% per year, over the period. This implies that the market is more cautious about the business these days. The low P/E ratio of 10.38 further reflects this reticence.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into MyState's key metrics by checking this interactive graph of MyState's 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. As it happens, MyState's TSR for the last 5 years was -12%, 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
Investors in MyState had a tough year, with a total loss of 25% (including dividends), against a market gain of about 4.7%. 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 2% per year over five years. 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 MyState better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with MyState (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.