For many investors, the main point of stock picking is to generate higher returns than the overall market. But if you try your hand at stock picking, your risk returning less than the market. We regret to report that long term Wodkan Przedsiebiorstwo Wodociagów i Kanalizacji S.A. (WSE:WOD) shareholders have had that experience, with the share price dropping 16% in three years, versus a market return of about 17%. Furthermore, it's down 10% in about a quarter. That's not much fun for holders. But this could be related to the weak market, which is down 6.5% in the same period.
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There is no denying that markets are sometimes efficient, but prices do not always reflect 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.
Wodkan Przedsiebiorstwo Wodociagów i Kanalizacji saw its EPS decline at a compound rate of 3.9% per year, over the last three years. The share price decline of 5.6% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Wodkan Przedsiebiorstwo Wodociagów i Kanalizacji's key metrics by checking this interactive graph of Wodkan Przedsiebiorstwo Wodociagów i Kanalizacji's earnings, revenue and cash flow.
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. In the case of Wodkan Przedsiebiorstwo Wodociagów i Kanalizacji, it has a TSR of -9.6% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Wodkan Przedsiebiorstwo Wodociagów i Kanalizacji shareholders have received a total shareholder return of 14% over the last year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 4.5% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Before deciding if you like the current share price, check how Wodkan Przedsiebiorstwo Wodociagów i Kanalizacji scores on these 3 valuation metrics.
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on PL exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.