In This Article:
The truth is that if you invest for long enough, you're going to end up with some losing stocks. But long term The Warehouse Group Limited (NZSE:WHS) shareholders have had a particularly rough ride in the last three year. Regrettably, they have had to cope with a 64% drop in the share price over that period. And over the last year the share price fell 28%, so we doubt many shareholders are delighted.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
See our latest analysis for Warehouse 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.
During the three years that the share price fell, Warehouse Group's earnings per share (EPS) dropped by 18% each year. This reduction in EPS is slower than the 29% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. This increased caution is also evident in the rather low P/E ratio, which is sitting at 11.63.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on Warehouse Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. We note that for Warehouse Group the TSR over the last 3 years was -55%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
While the broader market lost about 2.1% in the twelve months, Warehouse Group shareholders did even worse, losing 21% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 3% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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 risks, for instance. Every company has them, and we've spotted 2 warning signs for Warehouse Group you should know about.