Yahoo Finance Comvita (NZSE:CVT) stock falls 20% in past week as five-year earnings and shareholder returns continue downward trend
Statistically speaking, long term investing is a profitable endeavour. But that doesn't mean long term investors can avoid big losses. For example, after five long years the Comvita Limited (NZSE:CVT) share price is a whole 61% lower. That's an unpleasant experience for long term holders. We also note that the stock has performed poorly over the last year, with the share price down 46%. Furthermore, it's down 41% in about a quarter. That's not much fun for holders.
If the past week is anything to go by, investor sentiment for Comvita isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
Check out our latest analysis for Comvita
There is no denying that markets are sometimes efficient, but prices do not always reflect 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).
Comvita became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.
In contrast to the share price, revenue has actually increased by 5.4% a year in the five year period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that Comvita has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Comvita's TSR for the last 5 years was -56%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We regret to report that Comvita shareholders are down 45% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 1.4%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 9% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Comvita is showing 3 warning signs in our investment analysis , you should know about...
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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 New Zealander 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.
