As an investor its worth striving to ensure your overall portfolio beats the market average. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. We regret to report that long term Formosa Prosonic Industries Berhad (KLSE:FPI) shareholders have had that experience, with the share price dropping 45% in three years, versus a market return of about 12%. And the ride hasn't got any smoother in recent times over the last year, with the price 43% lower in that time. Furthermore, it's down 35% in about a quarter. That's not much fun for holders. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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).
During the three years that the share price fell, Formosa Prosonic Industries Berhad's earnings per share (EPS) dropped by 21% each year. This change in EPS is reasonably close to the 18% average annual decrease in the share price. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. In this case, it seems that the EPS is guiding the share price.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Formosa Prosonic Industries Berhad's key metrics by checking this interactive graph of Formosa Prosonic Industries Berhad's earnings, revenue and cash flow.
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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, Formosa Prosonic Industries Berhad's TSR for the last 3 years was -32%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!