Investors in Luxfer Holdings (NYSE:LXFR) have unfortunately lost 59% over the last five years
We think intelligent long term investing is the way to go. But no-one is immune from buying too high. For example, after five long years the Luxfer Holdings PLC (NYSE:LXFR) share price is a whole 65% lower. That's not a lot of fun for true believers. And it's not just long term holders hurting, because the stock is down 45% in the last year. Furthermore, it's down 28% in about a quarter. That's not much fun for holders.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Luxfer Holdings
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the five years over which the share price declined, Luxfer Holdings' earnings per share (EPS) dropped by 23% each year. Notably, the share price has fallen at 19% per year, fairly close to the change in the EPS. This suggests that market participants have not changed their view of the company all that much. Rather, the share price change has reflected changes in earnings per share.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. Dive deeper into the earnings by checking this interactive graph of Luxfer Holdings' earnings, revenue and cash flow.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Luxfer Holdings the TSR over the last 5 years was -59%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Luxfer Holdings shareholders are down 43% for the year (even including dividends), but the market itself is up 16%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. 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. To that end, you should be aware of the 3 warning signs we've spotted with Luxfer Holdings .
Luxfer Holdings is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
