De La Rue (LON:DLAR) shareholders have endured a 75% loss from investing in the stock five years ago
We're definitely into long term investing, but some companies are simply bad investments over any time frame. We don't wish catastrophic capital loss on anyone. Imagine if you held De La Rue plc (LON:DLAR) for half a decade as the share price tanked 78%.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for De La Rue
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
We know that De La Rue has been profitable in the past. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics might give us a better handle on how its value is changing over time.
It could be that the revenue decline of 11% per year is viewed as evidence that De La Rue is shrinking. That could explain the weak share price.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
If you are thinking of buying or selling De La Rue stock, you should check out this FREE detailed report on its balance sheet.
What About The Total Shareholder Return (TSR)?
We've already covered De La Rue's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for De La Rue shareholders, and that cash payout explains why its total shareholder loss of 75%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
It's nice to see that De La Rue shareholders have received a total shareholder return of 55% over the last year. That certainly beats the loss of about 12% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for De La Rue you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British 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.
