When you invest in stocks, you inevitably end up buying companies that are underperforming.But in the long run Micromechanics (Holdings) Co., Ltd. (SGX:5DD) shareholders have had a particularly tough time over the past three years. Therefore, they may have been emotional about the 58% drop in stock prices at the time. More recent buyers have also struggled, with stocks down 32% last year. Furthermore, about a quarter of them have fallen by 28%. That's not much fun for the holder.
Shareholders are down over the long term, so let's take a look at the underlying fundamentals over that time period to see if that's in line with the returns.
Check out our latest analysis for Micromechanics (Holdings).
To paraphrase Benjamin Graham, in the short term the market is a voting machine, but in the long term it is a weighing machine. One imperfect but simple way to consider how the market perception of a company has changed is to compare the change in the earnings per share (EPS) with the share price movement.
Micromechanics (Holdings) has seen its EPS decline at an average annual rate of 23% over the last three years. This change in EPS is pretty close to the average 25% annual decline in share price. In other words, sentiment towards the stock doesn't seem to have changed much over time. In this case, EPS appears to be guiding the stock price.
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 worth taking a look at ours free Micro-Mechanics (Holdings) earnings, revenue and cash flow report.
What will happen to the dividend?
As well as measuring share price return, investors should also consider total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return delivered by a stock. Coincidentally, Micromechanics (Holdings)'s TSR over the past three years was -52%, which is better than the share price return mentioned above. And there's no kudos to speculating that dividend payments are the main explanation for the divergence.
different perspective
While the broader market lost around 3.1% in the twelve months, Micromechanics (Holdings) shareholders fared even worse, losing 30% (even including dividends). However, it is also possible that the stock price is simply being affected by broader market fluctuations. It might be worth looking at the basics in case a good opportunity presents itself. Long-term investors won't be too upset since they would have made a 2% return each year over five years. If fundamental data continues to point to long-term sustainable growth, the current selloff could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important.Case in point: we discovered 3 warning signs for Micromechanics (Holdings) Note that one of them is important.
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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 Singapore exchanges.
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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
