Temenos (VTX:TEMN) shareholders are in the red if they invested three years ago

Temenos AG (VTX:TEMN) Shareholders should be happy to see the stock price rise 15% over the past month. But that doesn’t change the fact that returns over the past three years have been less than pleasing. In fact, the stock price is down 41% in three years and that return, dear reader, is less than what you could have gotten from passive investing with an index fund.

With that in mind, it’s worth seeing whether the company’s underlying fundamentals have been driving long-term performance, or if there are any gaps.

Discover our latest analysis for Temenos

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. One way to look at how market sentiment has changed over time is to look at the interaction between a company’s stock price and its earnings per share (EPS).

Temenos has seen its EPS decline at a compound rate of 0.3% per annum, over the past three years. This reduction in EPS is slower than the 16% annual reduction in share price. 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).

SWX: TEMN Earnings Per Share Growth May 14, 2022

Dive deeper into key Temenos metrics by viewing this interactive chart of Temenos earnings, revenue, and cash flow.

A different perspective

While the broader market gained around 4.6% last year, Temenos shareholders lost 24% (including dividends). Even good stock prices sometimes drop, but we want to see improvements in a company’s fundamentals before we get too interested. Longer-term investors wouldn’t be so upset, as they would have gained 3%, every year, over five years. If fundamentals continue to point to sustainable long-term growth, the current sell-off could be an opportunity to consider. It is always interesting to follow the evolution of the share price over the long term. But to better understand Temenos, we need to consider many other factors. For example, we found 1 warning sign for Temenos which you should be aware of before investing here.

Sure, you might find a fantastic investment by looking elsewhere. So take a look at this free list of companies that we believe will increase their profits.

Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on CH stock exchanges.

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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