Telephone and Data Systems (NYSE:TDS) shareholders are in the red if they had invested three years ago

In order to justify the effort of picking individual stocks, it is worth striving to beat the returns of an index fund. But in any portfolio, some stocks are likely to fall below this benchmark. We regret to report that in the long run Telephone and Data Systems, Inc. (NYSE: TDS) shareholders have had this experience, with the stock price falling 51% in three years, against a market return of around 40%. And the ride hasn’t been smoother lately in the past year, with the price 30% lower in that time. Moreover, it fell by 17% in about a quarter. It’s not much fun for the holders.

So let’s take a look and see if the long-term performance of the business has been in line with the progress of the underlying business.

Check out our latest analysis for phone and data systems

Although the efficient markets hypothesis continues to be taught by some, it has been proven that markets are dynamic systems that are too reactive and that investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get an idea of ​​how investors’ attitudes toward a company change over time.

During the three years of declining stock prices, earnings per share (EPS) for Telephone and Data Systems fell 13% each year. The 21% share price decline is actually more pronounced than the EPS slide. It is therefore likely that the drop in EPS disappointed the market, leaving investors hesitant to buy.

The image below shows how EPS has tracked over time (if you click on the image you can see more details).

earnings per share growth

This free Telephone and Data Systems’ 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?

In addition to measuring share price performance, investors should also consider total shareholder return (TSR). While the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they have been reinvested) and the benefit of any capital raising or spin-offs. off updated. It’s fair to say that the TSR gives a more complete picture of stocks that pay a dividend. In the case of Telephony and Information Systems, it posted a TSR of -46% over the last 3 years. This exceeds the performance of its share price that we mentioned earlier. The dividends paid by the company thus inflated the total return to shareholders.

A different perspective

While the broader market lost around 14% in the twelve months, Telephone and Data Systems shareholders fared even worse, losing 28% (even including dividends). That said, it is inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year’s performance capped a bad run, with shareholders facing a total loss of 6% 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. While it is worth considering the various impacts that market conditions can have on the stock price, there are other, even more important factors. Example: we have identified 3 warning signs for telephone and data systems you should be aware of, and 1 of them is significant.

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 US exchanges.

Feedback on this article? Concerned about content? Get in touch with us directly. You can also email the editorial team (at) Simplywallst.com.

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.

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