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Ideally, your overall portfolio should beat the market average. But even the best stock picker will only win with some selections. So we wouldn't blame long term Vodacom Group Limited (JSE:VOD) shareholders for doubting their decision to hold, with the stock down 21% over a half decade.
While the last five years has been tough for Vodacom Group shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.
Check out our latest analysis for Vodacom Group
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 the five years over which the share price declined, Vodacom Group's earnings per share (EPS) dropped by 1.7% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 5% per year, over the period. So it seems the market was too confident about the business, in the past.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Vodacom Group's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Vodacom Group's TSR for the last 5 years was 8.4%, 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
While the broader market lost about 1.0% in the twelve months, Vodacom Group shareholders did even worse, losing 8.9% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 1.6%, each year, over five years. 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Vodacom Group , and understanding them should be part of your investment process.