Low-cost index funds make it easy to achieve average market returns. But across the board there are plenty of stocks that underperform the market. That's what has happened with the F.I.L.A. - Fabbrica Italiana Lapis ed Affini S.p.A. (BIT:FILA) share price. It's up 17% over three years, but that is below the market return. Zooming in, the stock is up a respectable 13% in the last year.
Check out our latest analysis for F.I.L.A. - Fabbrica Italiana Lapis ed Affini
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the three years of share price growth, F.I.L.A. - Fabbrica Italiana Lapis ed Affini actually saw its earnings per share (EPS) drop 18% per year.
So we doubt that the market is looking to EPS for its main judge of the company's value. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
Languishing at just 0.5%, we doubt the dividend is doing much to prop up the share price. It may well be that F.I.L.A. - Fabbrica Italiana Lapis ed Affini revenue growth rate of 18% over three years has convinced shareholders to believe in a brighter future. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that F.I.L.A. - Fabbrica Italiana Lapis ed Affini has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think F.I.L.A. - Fabbrica Italiana Lapis ed Affini 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. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, F.I.L.A. - Fabbrica Italiana Lapis ed Affini's TSR for the last 3 years was 23%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
F.I.L.A. - Fabbrica Italiana Lapis ed Affini produced a TSR of 14% over the last year. While you don't go broke making a profit, this return was actually lower than the average market return of about 18%. On the other hand, the TSR over three years was worse, at just 7.3% per year. This suggests the company's position is improving. If the business can justify the share price gain with improving fundamental data, then there could be more gains to come. Before deciding if you like the current share price, check how F.I.L.A. - Fabbrica Italiana Lapis ed Affini scores on these 3 valuation metrics.
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IT exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.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.