Want to participate in a short research study? Help shape the future of investing tools and you could win a $250 gift card!
Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Global Ports Holding Plc (LON:GPH) shareholders over the last year, as the share price declined 27%. That falls noticeably short of the market return of around 0.6%. Global Ports Holding hasn't been listed for long, so although we're wary of recent listings that perform poorly, it may still prove itself with time. Even worse, it's down 8.4% in about a month, which isn't fun at all.
View our latest analysis for Global Ports Holding
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
During the last year Global Ports Holding grew its earnings per share, moving from a loss to a profit. It's good to see it turn a profit, but we note it was reasonably close to profitability last year. Taking a look at the share price, it seems that investors were expecting better from the company. Given the improvement, though, contrarian investors might want to take a closer look.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Global Ports Holding's TSR for the last year was -20%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Given that the market gained 0.6% in the last year, Global Ports Holding shareholders might be miffed that they lost 20% (even including dividends). While the aim is to do better than that, it's worth recalling that even great long-term investments sometimes underperform for a year or more. The share price decline has continued throughout the most recent three months, down 3.4%, suggesting an absence of enthusiasm from investors. Basically, most investors should be wary of buying into a poor-performing stock, unless the business itself has clearly improved. Before forming an opinion on Global Ports Holding you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.