Some people like to talk about how their investments have performed. While it's natural to selectively mention those that have done well, investors should periodically review their stocks as part of their investment process. That way, you can make an informed decision about whether to buy, hold, or sell shares.
FMC (FMC +0.63%) certainly had an eventful year. How would shareholders have done if they'd bought $3,000 worth of shares a year ago?
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Calculating the investment total
The last year hasn't been kind to FMC's shareholders. The share price lost 75.8% in the year up to Dec. 11. By comparison, the S&P 500 index gained 13.4%.
FMC had a total return of negative 74.4%, which includes the price change plus dividend payments. Meanwhile, the S&P 500 returned 14.9%.
NYSE: FMC
Key Data Points
Notably, shareholders can't expect the same level of dividend payments. The board of directors recently slashed the quarterly dividend by more than 86% to $0.08 per share.
Your $3,000 investment is only worth $768 today. Had you invested in the S&P 500 index, you'd have $3,447.
Value stock or value trap?
It's typically not a good sign when companies cut dividends, which explains the reluctance of many to do so.
FMC hasn't been performing well. Adjusted third-quarter revenue dropped 11%. Management also lowered its full-year revenue outlook. It's now calling for a 7% decline.
It's difficult to measure the company's earnings, given the various charges. Therefore, the price-to-sales (P/S) ratio seems like the better valuation metric. On that basis, FMC's P/S multiple has dropped from 1.6 to 0.5 over the last year.
However, this looks like a value trap. Given the company's top-line challenges and cash flow constraints, as evidenced by the need to cut dividends, I'd pass on the shares.
