One of the frustrations of investing is when a stock goes down. But it can difficult to make money in a declining market. The First Ship Lease Trust (SGX:D8DU) is down 53% over three years, but the total shareholder return is 18% once you include the dividend. And that total return actually beats the market decline of 6.6%. And more recent buyers are having a tough time too, with a drop of 49% in the last year. The falls have accelerated recently, with the share price down 12% in the last three months.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they’ve been consistent with returns.
View our latest analysis for First Ship Lease Trust
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…’ By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
First Ship Lease Trust saw its EPS decline at a compound rate of 16% per year, over the last three years. The share price decline of 22% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
This free interactive report on First Ship Lease Trust’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 First Ship Lease Trust the TSR over the last 3 years was 18%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Investors in First Ship Lease Trust had a tough year, with a total loss of 26% (including dividends), against a market gain of about 4.3%. 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 44%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example – First Ship Lease Trust has 2 warning signs (and 1 which is potentially serious) we think you should know about.
But note: First Ship Lease Trust may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Singaporean 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.
