Vesuvius plc (LON:VSVS) shareholders should be happy to see the share price up 12% in the last month. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 23% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
View our latest analysis for Vesuvius
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
Vesuvius saw its EPS decline at a compound rate of 7.0% per year, over the last three years. This fall in EPS isn't far from the rate of share price decline, which was 8.2% per year. That suggests that the market sentiment around the company hasn't changed much over that time, despite the disappointment. Rather, the share price has approximately tracked EPS growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Vesuvius' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
We've already covered Vesuvius' share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Vesuvius shareholders, and that cash payout explains why its total shareholder loss of 17%, over the last 3 years, isn't as bad as the share price return.
A Different Perspective
While the broader market lost about 7.9% in the twelve months, Vesuvius shareholders did even worse, losing 9.9%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 4.5% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Vesuvius better, we need to consider many other factors. For example, we've discovered 3 warning signs for Vesuvius that you should be aware of before investing here.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
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. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.
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August 11, 2020 at 08:08PM
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