It's easy to match the overall market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the Rogers Communications Inc. (TSE:RCI.B) share price slid 18% over twelve months. That's disappointing when you consider the market declined 2.5%. Even if shareholders bought some time ago, they wouldn't be particularly happy: the stock is down 18% in three years. The good news is that the stock is up 3.6% in the last week.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Unfortunately Rogers Communications reported an EPS drop of 18% for the last year. This change in EPS is remarkably close to the 18% decrease in the share price. So it seems that the market sentiment has not changed much, despite the weak results. Rather, the share price is remains a similar multiple of the EPS, suggesting the outlook remains the same.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Rogers Communications' key metrics by checking this interactive graph of Rogers Communications's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Rogers Communications the TSR over the last year was -16%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While the broader market lost about 2.5% in the twelve months, Rogers Communications shareholders did even worse, losing 16% (even including dividends). 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 6% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off 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. For example, we've discovered 1 warning sign for Rogers Communications that you should be aware of before investing here.
Of course Rogers Communications may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA 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.
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