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Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, you risk returning less than the market. We regret to report that long term Wynnstay Group Plc (LON:WYN) shareholders have had that experience, with the share price dropping 44% in three years, versus a market return of about 17%. And over the last year the share price fell 28%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 10% in the last three months.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out our latest analysis for Wynnstay Group
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.
Wynnstay Group saw its EPS decline at a compound rate of 7.1% per year, over the last three years. This reduction in EPS is slower than the 17% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on Wynnstay Group'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, Wynnstay Group's TSR for the last 3 years was -37%, 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 Wynnstay Group had a tough year, with a total loss of 24% (including dividends), against a market gain of about 13%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 5%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Wynnstay Group you should be aware of.