Canada markets open in 3 hours 8 minutes
  • S&P/TSX

    20,485.66
    -39.74 (-0.19%)
     
  • S&P 500

    4,071.70
    -4.87 (-0.12%)
     
  • DOW

    34,429.88
    +34.88 (+0.10%)
     
  • CAD/USD

    0.7450
    +0.0025 (+0.34%)
     
  • CRUDE OIL

    81.88
    +1.90 (+2.38%)
     
  • BTC-CAD

    23,238.08
    +285.11 (+1.24%)
     
  • CMC Crypto 200

    410.44
    +9.02 (+2.25%)
     
  • GOLD FUTURES

    1,808.70
    -0.90 (-0.05%)
     
  • RUSSELL 2000

    1,892.84
    +11.16 (+0.59%)
     
  • 10-Yr Bond

    3.5060
    0.0000 (0.00%)
     
  • NASDAQ futures

    11,980.75
    -29.50 (-0.25%)
     
  • VOLATILITY

    20.14
    +0.30 (+1.51%)
     
  • FTSE

    7,578.21
    +21.98 (+0.29%)
     
  • NIKKEI 225

    27,820.40
    +42.50 (+0.15%)
     
  • CAD/EUR

    0.7060
    +0.0016 (+0.23%)
     

Shareholders in Deterra Royalties (ASX:DRR) are in the red if they invested a year ago

One simple way to benefit from a rising market is to buy an index fund. By comparison, an individual stock is unlikely to match market returns - and could well fall short. For example, that's what happened with Deterra Royalties Limited (ASX:DRR) over the last year - it's share price is down 12% versus a market decline of 6.1%. Because Deterra Royalties hasn't been listed for many years, the market is still learning about how the business performs. In the last ninety days we've seen the share price slide 15%. Of course, this share price action may well have been influenced by the 15% decline in the broader market, throughout the period.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Deterra Royalties

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Even though the Deterra Royalties share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped.

The divergence between the EPS and the share price is quite notable, during the year. But we might find some different metrics explain the share price movements better.

Deterra Royalties' dividend seems healthy to us, so we doubt that the yield is a concern for the market. The revenue trend doesn't seem to explain why the share price is down. Of course, it could simply be that it simply fell short of the market consensus expectations.

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

earnings-and-revenue-growth
earnings-and-revenue-growth

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think Deterra Royalties will earn in the future (free profit forecasts).

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Deterra Royalties' TSR for the last 1 year was -6.6%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Deterra Royalties shareholders are down 6.6% over twelve months (even including dividends). That's reasonably close to the the market return of -6.1%. The market seemed to become more cautious in the last three months, sending the share price 15% lower. This sort of price action makes us nervous, but solid improvements in the business could pique our interest. It's always interesting to track share price performance over the longer term. But to understand Deterra Royalties better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Deterra Royalties , 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 AU 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