SEI Investments (NASDAQ:SEIC) shareholders suffered an 18% loss after investing in the stock five years ago

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For many, the primary purpose of investing is to generate returns above those of the overall market. But the main game is finding enough winners to more than make up for the losers, so we wouldn’t blame in the long run. SEI Investment Company (NASDAQ:SEIC) shareholders for doubting their decision to hold as the stock has fallen 23% in half a decade. Even worse, it’s down 13% in about a month, which isn’t fun at all. We note, however, that the broader market was down 9.0% during this period, which may have weighed on the stock price.

Given that shareholders are down longer term, let’s take a look at the underlying fundamentals over this period and see if they have been consistent with returns.

While markets are a powerful pricing mechanism, stock prices reflect investor sentiment, not just underlying trading performance. An imperfect but reasonable way to gauge changing sentiment around a company is to compare earnings per share (EPS) with the stock price.

Although the stock price has declined over five years, SEI Investments has actually managed to increase EPS of 14% on average per year. Given the stock price reaction, one might suspect that EPS is not a good indicator of the company’s performance over the period (perhaps due to a loss or a one-time gain). Or maybe the market was previously very bullish, so the stock disappointed, despite improving EPS.

Due to the stark contrast between EPS growth rate and stock price growth, we are inclined to look to other metrics to understand the shift in market sentiment around the stock.

The modest 1.6% dividend yield is unlikely to guide market sentiment on the stock. Turnover is actually up 5.6% over the period. So it looks like we need to take a closer look at the fundamentals to understand why the stock price is languishing. After all, there may be an opportunity.

You can see how earnings and income have changed over time below (find out the exact values ​​by clicking on the image).

NasdaqGS: SEIC Earnings and Revenue Growth October 9, 2022

It’s probably worth noting that the CEO is paid less than the median at companies of a similar size. But while it’s still worth checking out CEO compensation, the really important question is whether the company can increase its profits in the future. If you are considering buying or selling shares of SEI Investments, you should review this free report showing analyst earnings forecast.

What about dividends?

In addition to measuring share price performance, investors should also consider total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital increases, as well as any dividends, assuming the dividends are reinvested. It can be said that the TSR gives a more complete picture of the return generated by a stock. It turns out that SEI Investments’ TSR for the past 5 years was -18%, which exceeds the stock price return mentioned earlier. And there’s no price guessing that dividend payouts largely explain the divergence!

A different perspective

While it was certainly disappointing to see that SEI Investments shares lost 17% throughout the year, it wasn’t nearly as bad as the market’s 21% loss. Given the total loss of 3% per year over five years, it seems that returns have deteriorated over the past twelve months. While some investors do well at specializing in buying distressed (but nonetheless undervalued) companies, remember that Buffett said “turnarounds rarely turn around.” While it is worth considering the various impacts that market conditions can have on the stock price, there are other, even more important factors. Take for example the ubiquitous specter of investment risk. We have identified 2 warning signs with SEI Investments (at least 1 which should not be ignored) and understanding them should be part of your investment process.

If you’d rather check out another company – one with potentially superior finances – then don’t miss this free list of companies that have proven that they can increase their profits.

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

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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