In This Article:
For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, you risk returning less than the market. We regret to report that long term Kelsian Group Limited (ASX:KLS) shareholders have had that experience, with the share price dropping 48% in three years, versus a market return of about 19%. And more recent buyers are having a tough time too, with a drop of 39% in the last year. Furthermore, it's down 22% in about a quarter. That's not much fun for holders.
With the stock having lost 9.0% 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 Kelsian Group
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.
Although the share price is down over three years, Kelsian Group actually managed to grow EPS by 7.3% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Or else the company was over-hyped in the past, and so its growth has disappointed.
It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.
We note that the dividend seems healthy enough, so that probably doesn't explain the share price drop. We like that Kelsian Group has actually grown its revenue over the last three years. But it's not clear to us why the share price is down. It might be worth diving deeper into the fundamentals, lest an opportunity goes begging.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. You can see what analysts are predicting for Kelsian Group 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 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Kelsian Group the TSR over the last 3 years was -43%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.