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In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Sapphire Corporation Limited (SGX:BRD) shareholders have had that experience, with the share price dropping 32% in three years, versus a market return of about 23%. The falls have accelerated recently, with the share price down 16% in the last three months. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
Since Sapphire has shed S$2.0m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
View our latest analysis for Sapphire
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Sapphire saw its EPS decline at a compound rate of 67% per year, over the last three years. This was, in part, due to extraordinary items impacting earnings. This fall in the EPS is worse than the 12% compound annual share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in. With a P/E ratio of 91.58, it's fair to say the market sees a brighter future for the business.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on Sapphire's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About The Total Shareholder Return (TSR)?
We've already covered Sapphire's share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Its history of dividend payouts mean that Sapphire's TSR of 15% over the last 3 years is better than the share price return.
A Different Perspective
Sapphire shareholders are down 12% for the year, but the market itself is up 25%. 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 11% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Sapphire better, we need to consider many other factors. To that end, you should be aware of the 3 warning signs we've spotted with Sapphire .