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Did Changing Sentiment Drive Vivendi's (EPA:VIV) Share Price Down By 29%?

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. That downside risk was realized by Vivendi SA (EPA:VIV) shareholders over the last year, as the share price declined 29%. That's disappointing when you consider the market returned -16%. On the bright side, the stock is actually up 1.3% in the last three years. In the last ninety days we've seen the share price slide 30%. However, one could argue that the price has been influenced by the general market, which is down 26% in the same timeframe.

See our latest analysis for Vivendi

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

The last year saw Vivendi's EPS really take off. We don't think the growth guide to the sustainable growth rate in this case, but we do think this sort of increase is impressive. So we are surprised the share price is down. So it's worth taking a look at some other metrics.

Vivendi managed to grow revenue over the last year, which is usually a real positive. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

ENXTPA:VIV Income Statement March 31st 2020
ENXTPA:VIV Income Statement March 31st 2020

Vivendi is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Vivendi's total shareholder return (TSR) and its share price return. 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 Vivendi shareholders, and that cash payout explains why its total shareholder loss of 28%, over the last year, isn't as bad as the share price return.

A Different Perspective

While the broader market lost about 16% in the twelve months, Vivendi shareholders did even worse, losing 28% (even including dividends) . However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Longer term investors wouldn't be so upset, since they would have made 0.2%, 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. 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. Take risks, for example - Vivendi has 4 warning signs (and 2 which don't sit too well with us) we think you should know about.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on FR exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.