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The main aim of stock picking is to find the market-beating stocks. But in any portfolio, there will be mixed results between individual stocks. So we wouldn't blame long term Travis Perkins plc (LON:TPK) shareholders for doubting their decision to hold, with the stock down 49% over a half decade. Furthermore, it's down 14% in about a quarter. That's not much fun for holders.
With the stock having lost 11% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Check out our latest analysis for Travis Perkins
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
In the last half decade Travis Perkins saw its share price fall as its EPS declined below zero. The recent extraordinary items contributed to this situation. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. However, we can say we'd expect to see a falling share price in this scenario.
You can see below how EPS has changed over time (discover 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. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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, Travis Perkins' TSR for the last 5 years was -32%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Travis Perkins shareholders gained a total return of 13% during the year. But that return falls short of the market. But at least that's still a gain! Over five years the TSR has been a reduction of 6% per year, over five years. So this might be a sign the business has turned its fortunes around. Before spending more time on Travis Perkins it might be wise to click here to see if insiders have been buying or selling shares.