Andrew Peller (TSE:ADW.A) shareholders have endured a 43% loss from investing in the stock three years ago

·3 min read

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Andrew Peller Limited (TSE:ADW.A) shareholders have had that experience, with the share price dropping 46% in three years, versus a market return of about 44%. The more recent news is of little comfort, with the share price down 27% in a year.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Andrew Peller

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. 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.

Andrew Peller saw its EPS decline at a compound rate of 11% per year, over the last three years. The share price decline of 19% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
earnings-per-share-growth

This free interactive report on Andrew Peller'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. 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. We note that for Andrew Peller the TSR over the last 3 years was -43%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Andrew Peller shareholders are down 25% for the year (even including dividends), but the market itself is up 18%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. 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. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Andrew Peller better, we need to consider many other factors. Take risks, for example - Andrew Peller has 4 warning signs (and 2 which are a bit unpleasant) we think you should know about.

Of course Andrew Peller 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 CA exchanges.

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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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