Canada Markets close in 46 mins
  • S&P/TSX

    20,196.46
    -187.31 (-0.92%)
     
  • S&P 500

    3,958.97
    -67.15 (-1.67%)
     
  • DOW

    33,832.58
    -514.45 (-1.50%)
     
  • CAD/USD

    0.7414
    -0.0061 (-0.8215%)
     
  • CRUDE OIL

    76.94
    +0.66 (+0.87%)
     
  • BTC-CAD

    21,903.17
    -556.39 (-2.48%)
     
  • CMC Crypto 200

    380.64
    +0.35 (+0.09%)
     
  • GOLD FUTURES

    1,738.70
    -15.30 (-0.87%)
     
  • RUSSELL 2000

    1,834.42
    -34.77 (-1.86%)
     
  • 10-Yr Bond

    3.7070
    +0.0160 (+0.43%)
     
  • NASDAQ

    11,033.49
    -192.87 (-1.72%)
     
  • VOLATILITY

    22.20
    +1.70 (+8.29%)
     
  • FTSE

    7,474.02
    -12.65 (-0.17%)
     
  • NIKKEI 225

    28,162.83
    -120.20 (-0.42%)
     
  • CAD/EUR

    0.7169
    -0.0017 (-0.24%)
     

Exco Technologies (TSE:XTC) shareholders have endured a 18% loss from investing in the stock a year ago

It's easy to match the overall market return by buying an index fund. 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 Exco Technologies Limited (TSE:XTC) shareholders over the last year, as the share price declined 22%. That falls noticeably short of the market decline of around 4.6%. Longer term investors have fared much better, since the share price is up 7.4% in three years. Even worse, it's down 8.9% in about a month, which isn't fun at all. However, we note the price may have been impacted by the broader market, which is down 7.3% in the same time period.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

View our latest analysis for Exco Technologies

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Unhappily, Exco Technologies had to report a 51% decline in EPS over the last year. The share price fall of 22% isn't as bad as the reduction in earnings per share. It may have been that the weak EPS was not as bad as some had feared.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
earnings-per-share-growth

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. It might be well worthwhile taking a look at our free report on Exco Technologies' 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Exco Technologies, it has a TSR of -18% for the last 1 year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We regret to report that Exco Technologies shareholders are down 18% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 4.6%. 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. On the bright side, long term shareholders have made money, with a gain of 0.2% per year over half a decade. 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. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Exco Technologies , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here