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 Steamships Trading Company Limited (ASX:SST) shareholders for doubting their decision to hold, with the stock down 39% over a half decade.
Now let’s have a look at the company’s fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for Steamships Trading
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
While the share price declined over five years, Steamships Trading actually managed to increase EPS by an average of 2.1% per year. 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). Alternatively, growth expectations may have been unreasonable in the past.
Based on these numbers, we’d venture that the market may have been over-optimistic about forecast growth, half a decade ago. Having said that, we might get a better idea of what’s going on with the stock by looking at other metrics.
The most recent dividend was actually lower than it was in the past, so that may have sent the share price lower. The revenue decline of around 1.4% would not have helped the stock price. So it seems weak revenue and dividend trends may have influenced the share price.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
If you are thinking of buying or selling Steamships Trading stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Steamships Trading the TSR over the last 5 years was -27%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We’re pleased to report that Steamships Trading shareholders have received a total shareholder return of 10.0% over one year. And that does include the dividend. That certainly beats the loss of about 5% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It’s always interesting to track share price performance over the longer term. But to understand Steamships Trading better, we need to consider many other factors. Like risks, for instance. Every company has them, and we’ve spotted 2 warning signs for Steamships Trading (of which 1 is significant!) you should know about.
Of course Steamships Trading may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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