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Marks and Spencer Group (LON:MKS) stock falls 3.4% in past week as five-year earnings and shareholder returns continue downward trend

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·3 min read
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We think intelligent long term investing is the way to go. But along the way some stocks are going to perform badly. To wit, the Marks and Spencer Group plc (LON:MKS) share price managed to fall 65% over five long years. That's an unpleasant experience for long term holders. Furthermore, it's down 24% in about a quarter. That's not much fun for holders.

Since Marks and Spencer Group has shed UK£94m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

See our latest analysis for Marks and Spencer Group

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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Marks and Spencer Group moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.

The revenue fall of 2.6% per year for five years is neither good nor terrible. But it's quite possible the market had expected better; a closer look at the revenue trends might explain the pessimism.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free report showing analyst forecasts should help you form a view on Marks and Spencer Group

What about the Total Shareholder Return (TSR)?

We've already covered Marks and Spencer Group's share price action, but we should also mention its total shareholder return (TSR). 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. Its history of dividend payouts mean that Marks and Spencer Group's TSR, which was a 56% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

While the broader market lost about 0.1% in the twelve months, Marks and Spencer Group shareholders did even worse, losing 10%. 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. However, the loss over the last year isn't as bad as the 9% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Marks and Spencer Group better, we need to consider many other factors. For example, we've discovered 2 warning signs for Marks and Spencer Group that you should be aware of before investing here.

We will like Marks and Spencer 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.