Bulgarian Stock Exchange AD (BUL:BSE) sheds 49% this week, as yearly returns fall more in line with earnings growth

Bulgarian Stock Exchange AD (BUL:BSE) shareholders might be rather concerned because the share price has dropped 52% in the last month. Looking further back, the stock has generated good profits over five years. After all, the share price is up a market-beating 78% in that time.

While the stock has fallen 49% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality.

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Bulgarian Stock Exchange AD achieved compound earnings per share (EPS) growth of 32% per year. This EPS growth is higher than the 12% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 4.38.

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

Dive deeper into Bulgarian Stock Exchange AD's key metrics by checking this interactive graph of Bulgarian Stock Exchange AD's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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 Bulgarian Stock Exchange AD, it has a TSR of 170% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Although it hurts that Bulgarian Stock Exchange AD returned a loss of 16% in the last twelve months, the broader market was actually worse, returning a loss of 38%. Longer term investors wouldn't be so upset, since they would have made 22%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. 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. Even so, be aware that Bulgarian Stock Exchange AD is showing 3 warning signs in our investment analysis , and 2 of those are significant...

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Bulgarian 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.