Ideally, your overall portfolio should beat the market average. But in any portfolio, results will be mixed between individual stocks. At this stage, some shareholders may question their investment in Transcontinental Inc. (TSE:TCL.A), as the past five years have seen the stock price drop 22%. Unfortunately, the stock market dynamic is still quite negative, with prices down 11% in thirty days. It is important to note that this could be a market reaction to the recently released financial results. You can view the latest figures in our corporate report.

With the stock down 7.9% last week, it’s worth taking a look at the trade performance and seeing if there are any red flags.

See our latest analysis for Transcontinental

It is undeniable that markets are sometimes efficient, but prices do not always reflect the underlying performance of companies. One way to look at how market sentiment has changed over time is to look at the interaction between a company’s stock price and its earnings per share (EPS).

In the five years in which the share price declined, Transcontinental’s earnings per share (EPS) fell 6.6% each year. This drop in EPS is worse than the compound annual drop of 5% in the share price. The relatively muted stock price reaction could be due to the market expecting the company to recover.

The graph below illustrates the evolution of EPS over time (reveal the exact values ​​by clicking on the image).

TSX: TCL.A Earnings per share growth March 10, 2022

It’s probably worth noting that the CEO is paid less than the median at companies of a similar size. But while it’s still worth checking out CEO compensation, the really important question is whether the company can increase its profits in the future. This free Transcontinental’s Interactive Earnings, Revenue and Cash Flow Report is a great place to start if you want to do more research on the stock.

What about dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price performance. The TSR incorporates the value of any spin-offs or discounted capital increases, as well as any dividends, based on the assumption that dividends are reinvested. It can be said that the TSR gives a more complete picture of the return generated by a stock. In the case of Transcontinental, it has a TSR of -2.6% for the last 5 years. This exceeds the performance of its share price that we mentioned earlier. And there’s no price guessing that dividend payouts largely explain the divergence!

A different perspective

Transcontinental investors had a difficult year, with a total loss of 17% (including dividends), against a market gain of around 19%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year’s performance capped a bad patch, with shareholders facing a total loss of 0.5% per year over five years. We realize that Baron Rothschild said investors should “buy when there’s blood in the streets”, but we caution that investors must first make sure they are buying a high quality company. It is always interesting to follow the evolution of the share price over the long term. But to better understand Transcontinental, several other factors must be taken into account. Consider the risks, for example. Every business has them, and we’ve spotted 2 warning signs for Transcontinental you should know.

If you like buying stocks alongside management then you might love this free list of companies. (Hint: insiders bought them).

Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on CA exchanges.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.