DDH1 (ASX:DDH) investors are sitting on a loss of 21% if they invested a year ago
The simplest way to benefit from a rising market is to buy an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. That downside risk was realized by DDH1 Limited (ASX:DDH) shareholders over the last year, as the share price declined 25%. That's well below the market decline of 3.7%. We wouldn't rush to judgement on DDH1 because we don't have a long term history to look at.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for DDH1
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Unfortunately DDH1 reported an EPS drop of 49% for the last year. The share price fall of 25% isn't as bad as the reduction in earnings per share. So despite the weak per-share profits, some investors are probably relieved the situation wasn't more difficult.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on DDH1's 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. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, DDH1's TSR for the last 1 year was -21%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
DDH1 shareholders are down 21% for the year (even including dividends), even worse than the market loss of 3.7%. That's disappointing, but it's worth keeping in mind that the market-wide selling wouldn't have helped. It's great to see a nice little 1.2% rebound in the last three months. Let's just hope this isn't the widely-feared 'dead cat bounce' (which would indicate further declines to come). 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. For instance, we've identified 3 warning signs for DDH1 that you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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.
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