For many, the main point of investing is to generate higher returns than the overall market. But the main game is to find enough winners to more than offset the losers So we wouldn't blame long term U.S. Silica Holdings, Inc. (NYSE:SLCA) shareholders for doubting their decision to hold, with the stock down 27% over a half decade. Even worse, it's down 10% in about a month, which isn't fun at all.
Since U.S. Silica Holdings has shed US$65m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, U.S. Silica Holdings moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.
The revenue decline of 0.2% isn't too bad. But it's quite possible the market had expected better; a closer look at the revenue trends might explain the pessimism.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We know that U.S. Silica Holdings has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling U.S. Silica Holdings stock, you should check out this FREE detailed report on its balance sheet.
What About The Total Shareholder Return (TSR)?
We've already covered U.S. Silica Holdings' share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for U.S. Silica Holdings shareholders, and that cash payout explains why its total shareholder loss of 24%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
Investors in U.S. Silica Holdings had a tough year, with a total loss of 17%, against a market gain of about 18%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 4% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for U.S. Silica Holdings you should know about.
But note: U.S. Silica Holdings 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 American 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.