Yahoo Finance Anglo American Platinum (JSE:AMS) sheds R6.6b, company earnings and investor returns have been trending downwards for past three years
Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term Anglo American Platinum Limited (JSE:AMS) shareholders. Regrettably, they have had to cope with a 64% drop in the share price over that period. The falls have accelerated recently, with the share price down 19% in the last three months.
If the past week is anything to go by, investor sentiment for Anglo American Platinum isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
Check out our latest analysis for Anglo American Platinum
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.
During the three years that the share price fell, Anglo American Platinum's earnings per share (EPS) dropped by 25% each year. This fall in EPS isn't far from the rate of share price decline, which was 29% per year. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. It seems like the share price is reflecting the declining earnings per share.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. It might be well worthwhile taking a look at our free report on Anglo American Platinum's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Anglo American Platinum the TSR over the last 3 years was -53%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While the broader market gained around 2.6% in the last year, Anglo American Platinum shareholders lost 17% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Anglo American Platinum better, we need to consider many other factors. For instance, we've identified 3 warning signs for Anglo American Platinum (1 is a bit concerning) that you should be aware of.
Anglo American Platinum is not the only stock that insiders are buying. 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 South African exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
