The simplest way to benefit from a rising market is to buy an index fund. Active investors aim to buy stocks that vastly outperform the market – but in the process, they risk under-performance. Investors in Vivotek Inc (TPE:3454) have tasted that bitter downside in the last year, as the share price dropped 25%. That contrasts poorly with the market return of 21%. On the bright side, the stock is actually up 14% in the last three years. The silver lining is that the stock is up 3.5% in about a week.

View our latest analysis for Vivotek

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 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.

Unfortunately Vivotek reported an EPS drop of 11% for the last year. The share price decline of 25% is actually more than the EPS drop. So it seems the market was too confident about the business, a year ago.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

TSEC:3454 Past and Future Earnings, February 17th 2020
TSEC:3454 Past and Future Earnings, February 17th 2020

It might be well worthwhile taking a look at our free report on Vivotek’s earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

Investors should note that there’s a difference between Vivotek’s total shareholder return (TSR) and its share price change, which we’ve covered above. 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. Its history of dividend payouts mean that Vivotek’s TSR, which was a 23% drop over the last year, was not as bad as the share price return.

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A Different Perspective

Investors in Vivotek had a tough year, with a total loss of 23% (including dividends) , against a market gain of about 21%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn’t be so upset, since they would have made 5.5%, 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. Be aware that Vivotek is showing 1 warning sign in our investment analysis , you should know about…

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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