Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Propel Funeral Partners Limited (ASX:PFP) have tasted that bitter downside in the last year, as the share price dropped 15%. That’s disappointing when you consider the market declined 7.7%. Propel Funeral Partners may have better days ahead, of course; we’ve only looked at a one year period. Even worse, it’s down 11% in about a month, which isn’t fun at all.

Check out our latest analysis for Propel Funeral Partners

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).

Unfortunately Propel Funeral Partners reported an EPS drop of 21% for the last year. The share price fall of 15% 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.

The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
ASX:PFP Earnings Per Share Growth July 31st 2020

It might be well worthwhile taking a look at our free report on Propel Funeral Partners’ 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. We note that for Propel Funeral Partners the TSR over the last year was -12%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We doubt Propel Funeral Partners shareholders are happy with the loss of 12% over twelve months (even including dividends). That falls short of the market, which lost 7.7%. There’s no doubt that’s a disappointment, but the stock may well have fared better in a stronger market. The share price decline has continued throughout the most recent three months, down 0.7%, suggesting an absence of enthusiasm from investors. Given the relatively short history of this stock, we’d remain pretty wary until we see some strong business performance. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we’ve discovered 2 warning signs for Propel Funeral Partners that you should be aware of before investing here.

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 AU exchanges.

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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. 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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