N Brown Group plc (LON:BWNG) shareholders will doubtless be very grateful to see the share price up 32% in the last quarter. But don't envy holders -- looking back over 5 years the returns have been really bad. Indeed, the share price is down 63% in the period. So is the recent increase sufficient to restore confidence in the stock? Not yet. But it could be that the fall was overdone.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).
Over five years N Brown Group's earnings per share dropped significantly, falling to a loss, with the share price also lower. The recent extraordinary items contributed to this situation. At present it's hard to make valid comparisons between EPS and the share price. But we would generally expect a lower price, given the situation.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into N Brown Group's key metrics by checking this interactive graph of N Brown Group's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, N Brown Group's TSR for the last 5 years was -50%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that N Brown Group shareholders have received a total shareholder return of 57% over one year. That's including the dividend. That certainly beats the loss of about 13% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. If you would like to research N Brown Group in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
We will like N Brown Group better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
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