Yahoo Finance Investors in Nichols (LON:NICL) have unfortunately lost 33% over the last five years
The main aim of stock picking is to find the market-beating stocks. But in any portfolio, there will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in Nichols plc (LON:NICL), since the last five years saw the share price fall 40%.
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.
Check out our latest analysis for Nichols
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
During the five years over which the share price declined, Nichols' earnings per share (EPS) dropped by 6.2% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 10% per year, over the period. This implies that the market is more cautious about the business these days.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Nichols has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Nichols the TSR over the last 5 years was -33%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Nichols provided a TSR of 6.5% over the last twelve months. Unfortunately this falls short of the market return. But at least that's still a gain! Over five years the TSR has been a reduction of 6% per year, over five years. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand Nichols better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Nichols .
If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com
