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If You Had Bought Captii (SGX:AWV) Stock Three Years Ago, You'd Be Sitting On A 58% Loss, Today

If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the long term shareholders of Captii Limited (SGX:AWV) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 58% drop in the share price over that period. And more recent buyers are having a tough time too, with a drop of 42% in the last year. The falls have accelerated recently, with the share price down 32% in the last three months. However, one could argue that the price has been influenced by the general market, which is down 24% in the same timeframe.

Check out our latest analysis for Captii

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

During the three years that the share price fell, Captii's earnings per share (EPS) dropped by 27% each year. This fall in EPS isn't far from the rate of share price decline, which was 25% per year. So it seems like sentiment towards the stock hasn't changed all that much over time. Rather, the share price has approximately tracked EPS growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

SGX:AWV Past and Future Earnings April 1st 2020
SGX:AWV Past and Future Earnings April 1st 2020

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Captii, it has a TSR of -53% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 23% in the twelve months, Captii shareholders did even worse, losing 40% (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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6.2% 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. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Captii (at least 3 which are potentially serious) , and understanding them should be part of your investment process.

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 SG 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.