Shareholders in Westshore Terminals Investment (TSE:WTE) are in the red if they invested a year ago

Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the Westshore Terminals Investment Corporation (TSE:WTE) share price is down 31% in the last year. That’s well below the market return of 15%. On the other hand, the stock is actually up 22% over three years. Unfortunately the share price momentum is still quite negative, with prices down 14% in thirty days.

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 Westshore Terminals Investment

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 unfortunate twelve months during which the Westshore Terminals Investment share price fell, it actually saw its earnings per share (EPS) improve by 35%. It could be that the share price was previously over-hyped.

It’s fair to say that the share price does not seem to be reflecting the EPS growth. But we might find some different metrics explain the share price movements better.

We don’t see any weakness in the Westshore Terminals Investment’s dividend so the steady payout can’t really explain the share price drop. From what we can see, revenue is pretty flat, so that doesn’t really explain the share price drop. Unless, of course, the market was expecting a revenue uptick.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. So we recommend checking out this free report showing consensus forecasts

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 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Westshore Terminals Investment, it has a TSR of -26% for the last 1 year. That exceeds its share price return that we previously mentioned. And there’s no prize for guessing that the dividend payments largely explain the divergence!

Story continues

A Different Perspective

While the broader market gained around 15% in the last year, Westshore Terminals Investment shareholders lost 26% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn’t be so upset, since they would have made 7%, 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 Westshore Terminals Investment better, we need to consider many other factors. Case in point: We’ve spotted 2 warning signs for Westshore Terminals Investment you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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