If You Had Bought Impellam Group's (LON:IPEL) Shares Five Years Ago You Would Be Down 68%
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We think intelligent long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. Zooming in on an example, the Impellam Group PLC (LON:IPEL) share price dropped 68% in the last half decade. That is extremely sub-optimal, to say the least. We also note that the stock has performed poorly over the last year, with the share price down 49%. Furthermore, it's down 24% in about a quarter. That's not much fun for holders.
View our latest analysis for Impellam Group
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the five years over which the share price declined, Impellam Group's earnings per share (EPS) dropped by 29% each year. This fall in the EPS is worse than the 20% compound annual share price fall. So the market may previously have expected a drop, or else it expects the situation will improve.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Dive deeper into Impellam Group's key metrics by checking this interactive graph of Impellam Group's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Impellam Group's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Impellam Group's TSR of was a loss of 65% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
While the broader market lost about 9.2% in the twelve months, Impellam Group shareholders did even worse, losing 49%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 4 warning signs for Impellam Group (2 can't be ignored!) that you should be aware of before investing here.
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 GB exchanges.
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. 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.
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