The main aim of stock picking is to find the market-beating stocks. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term Robinson plc (LON:RBN) shareholders for doubting their decision to hold, with the stock down 47% over a half decade.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Looking back five years, both Robinson's share price and EPS declined; the latter at a rate of 7.1% per year. This reduction in EPS is less than the 12% annual reduction in the share price. So it seems the market was too confident about the business, in the past.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Robinson's TSR for the last 5 years was -31%, 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
It's good to see that Robinson has rewarded shareholders with a total shareholder return of 32% in the last twelve months. Of course, that includes the dividend. Notably the five-year annualised TSR loss of 7.2% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. For example, we've discovered 3 warning signs for Robinson (1 is significant!) that you should be aware of before investing here.
But note: Robinson may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.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.