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The main aim of stock picking is to find the market-beating stocks. But even the best stock picker will only win with some selections. So we wouldn't blame long term WH Smith PLC (LON:SMWH) shareholders for doubting their decision to hold, with the stock down 44% over a half decade. Unfortunately the share price momentum is still quite negative, with prices down 9.3% in thirty days.
After losing 5.8% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.
See our latest analysis for WH Smith
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
WH Smith became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.
Revenue is actually up 8.4% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
WH Smith is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think WH Smith will earn in the future (free analyst consensus estimates)
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, WH Smith's TSR for the last 5 years was -41%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
WH Smith shareholders gained a total return of 12% during the year. But that return falls short of the market. But at least that's still a gain! Over five years the TSR has been a reduction of 7% per year, over five years. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand WH Smith better, we need to consider many other factors. For example, we've discovered 3 warning signs for WH Smith that you should be aware of before investing here.