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Generally speaking long term investing is the way to go. But no-one is immune from buying too high. For example the Delfi Limited (SGX:P34) share price dropped 68% over five years. That is extremely sub-optimal, to say the least.
Check out our latest analysis for Delfi
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
During five years of share price growth, Delfi moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.
It could be that the revenue decline of 3.6% per year is viewed as evidence that Delfi is shrinking. That could explain the weak share price.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that Delfi has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for Delfi in this interactive graph of future profit estimates.
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, Delfi's TSR for the last 5 years was -63%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's good to see that Delfi has rewarded shareholders with a total shareholder return of 12% in the last twelve months. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 18% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. Before deciding if you like the current share price, check how Delfi scores on these 3 valuation metrics.
Of course Delfi may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on SG exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.