RTC Group plc (LON:RTC) shareholders might be concerned after seeing the share price drop 14% in the last quarter. On the bright side the returns have been quite good over the last half decade. After all, the share price is up a market-beating 39% in that time.
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. 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 five years of share price growth, RTC Group achieved compound earnings per share (EPS) growth of 9.8% per year. This EPS growth is higher than the 6.8% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 5.52 also suggests market apprehension.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
This free interactive report on RTC Group's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of RTC Group, it has a TSR of 79% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that RTC Group shareholders have received a total shareholder return of 3.5% over the last year. Of course, that includes the dividend. Having said that, the five-year TSR of 12% a year, is even better. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. Before forming an opinion on RTC Group you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
We will like RTC 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.
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