For many, the main point of investing is to generate higher returns than the overall market. But the main game is to find enough winners to more than offset the losers So we wouldn’t blame long term Compucom Software Limited (NSE:COMPUSOFT) shareholders for doubting their decision to hold, with the stock down 28% over a half decade. And it’s not just long term holders hurting, because the stock is down 23% in the last year. It’s up 2.3% in the last seven days.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
In the last half decade Compucom Software saw its share price fall as its EPS declined below zero. At present it’s hard to make valid comparisons between EPS and the share price. However, we can say we’d expect to see a falling share price in this scenario.
This free interactive report on Compucom Software’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. As it happens, Compucom Software’s TSR for the last 5 years was -24%, 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 9.9% in the twelve months, Compucom Software shareholders did even worse, losing 22% (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. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 5.4% per year over five years. We realise that Buffett 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 businesses. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
We will like Compucom Software better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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