It's easy to match the overall market return by buying an index fund. When you buy individual stocks, you can make higher profits, but you also face the risk of under-performance. For example, the Philip Morris International Inc. (NYSE:PM) share price is down 10% in the last year. That falls noticeably short of the market return of around 26%. The silver lining (for longer term investors) is that the stock is still 4.0% higher than it was three years ago.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Unfortunately Philip Morris International reported an EPS drop of 14% for the last year. This fall in the EPS is significantly worse than the 10% the share price fall. So the market may not be too worried about the EPS figure, at the moment -- or it may have expected earnings to drop faster.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Philip Morris International's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Philip Morris International, it has a TSR of -5.2% for the last 1 year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
While the broader market gained around 26% in the last year, Philip Morris International shareholders lost 5.2% (even including dividends). 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 6%, 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 3 warning signs for Philip Morris International (2 are a bit concerning) that you should be aware of.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
Have feedback on this article? Concerned about the content?Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. 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.
インデックスファンドを買うことで全体の市場リターンに追随することが簡単です。個別銘柄を買うと利益を上げることができますが、アンダーパフォーマンスのリスクも伴います。たとえば、Philip Morris International Inc. (NYSE: PM) の株価は過去1年間で10%下落しています。これは市場の約26%のリターンに明らかに劣っています。長期投資家としての唯一の救いは、株価が3年前よりも4.0%高いということです。
Philip Morris Internationalの収益、売上高、キャッシュフローに関するこの無料のインタラクティブレポートは、株式をさらに調査する場合に最適です。
配当については?
任意の株式の総合株主リターン、および株価リターンを考慮することが重要です。TSRは、配当が再投資されたと仮定して、スピンオフや割引資本調達の価値、および配当を考慮に入れます。配当を支払う株式については、TSRがより完全なイメージを提供すると言えます。 Philip Morris Internationalの場合、過去1年間のTSRは-5.2%で、以前に述べた株価リターンを上回っています。これは主に配当の支払いの結果です!