Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term Canfor Pulp Products Inc. (TSE:CFX) shareholders. Regrettably, they have had to cope with a 66% drop in the share price over that period. The more recent news is of little comfort, with the share price down 50% in a year. The falls have accelerated recently, with the share price down 17% in the last three months.
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
Over the three years that the share price declined, Canfor Pulp Products' earnings per share (EPS) dropped significantly, falling to a loss. Due to the loss, it's not easy to use EPS as a reliable guide to the business. However, we can say we'd expect to see a falling share price in this scenario.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It might be well worthwhile taking a look at our free report on Canfor Pulp Products' earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We've already covered Canfor Pulp Products' 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 Canfor Pulp Products shareholders, and that cash payout explains why its total shareholder loss of 61%, over the last 3 years, isn't as bad as the share price return.
A Different Perspective
While the broader market lost about 2.4% in the twelve months, Canfor Pulp Products shareholders did even worse, losing 49%. 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. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Even so, be aware that Canfor Pulp Products is showing 1 warning sign in our investment analysis , you should know about...
We will like Canfor Pulp Products better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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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