Yahoo Finance Volatility 101: Should Prada (HKG:1913) Shares Have Dropped 40%?
Prada S.p.A. (HKG:1913) shareholders should be happy to see the share price up 29% in the last quarter. But over the last half decade, the stock has not performed well. In fact, the share price is down 40%, which falls well short of the return you could get by buying an index fund.
See our latest analysis for Prada
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).
Looking back five years, both Prada's share price and EPS declined; the latter at a rate of 15% per year. The share price decline of 9.6% per year isn't as bad as the EPS decline. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Prada has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Prada will grow revenue in the future.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Prada's TSR for the last 5 years was -31%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Prada shareholders have received a total shareholder return of 7.2% over the last year. And that does include the dividend. Notably the five-year annualised TSR loss of 7.3% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. Is Prada cheap compared to other companies? These 3 valuation measures might help you decide.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on HK exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.
