RPS Group (LON:RPS) shareholders have endured a 54% loss from investing in the stock five years ago
Generally speaking long term investing is the way to go. But along the way some stocks are going to perform badly. For example the RPS Group plc (LON:RPS) share price dropped 59% over five years. That's an unpleasant experience for long term 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.
See our latest analysis for RPS Group
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).
RPS Group became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.
The modest 0.8% dividend yield is unlikely to be guiding the market view of the stock. Arguably, the revenue drop of 5.0% a year for half a decade suggests that the company can't grow in the long term. This has probably encouraged some shareholders to sell down the stock.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. So it makes a lot of sense to check out what analysts think RPS Group will earn in the future (free profit forecasts).
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for RPS Group the TSR over the last 5 years was -54%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Although it hurts that RPS Group returned a loss of 1.0% in the last twelve months, the broader market was actually worse, returning a loss of 3.6%. Of far more concern is the 9% p.a. loss served to shareholders over the last five years. While the losses are slowing we doubt many shareholders are happy with the stock. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with RPS Group , and understanding them should be part of your investment process.
RPS Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with 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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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.
