Investing in Basellandschaftliche Kantonalbank (VTX:BLKB) three years ago would have delivered you a 1.5% gain
In order to justify the effort of selecting individual stocks, it’s worth striving to beat the returns from a market index fund. But if you try your hand at stock picking, your risk returning less than the market. Unfortunately, that’s been the case for longer term Basellandschaftliche Kantonalbank (VTX:BLKB) shareholders, since the share price is down 10% in the last three years, falling well short of the market decline of around 9.2%.
With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for Basellandschaftliche Kantonalbank
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 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).
Although the share price is down over three years, Basellandschaftliche Kantonalbank actually managed to grow EPS by 3.4% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Or else the company was over-hyped in the past, and so its growth has disappointed.
With EPS gaining and a declining share price, one would suggest the market is cooling on its view of the company. Having said that, if the EPS gains continue we’d expect the share price to improve, longer term.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on Basellandschaftliche Kantonalbank’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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Basellandschaftliche Kantonalbank, it has a TSR of 1.5% for the last 3 years. That exceeds its share price return that we previously mentioned. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While the broader market gained around 5.1% in the last year, Basellandschaftliche Kantonalbank shareholders lost 3.5% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn’t be so upset, since they would have made 2%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Importantly, we haven’t analysed Basellandschaftliche Kantonalbank’s dividend history. This free visual report on its dividends is a must-read if you’re thinking of buying.
If you are like me, then you will 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 Swiss 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.
