Shareholders 55% loss in CMC Markets (LON:CMCX) partly attributable to the company's decline in earnings over past three years
It is doubtless a positive to see that the CMC Markets plc (LON:CMCX) share price has gained some 60% in the last three months. But that doesn't change the fact that the returns over the last three years have been disappointing. Regrettably, the share price slid 61% in that period. Some might say the recent bounce is to be expected after such a bad drop. After all, could be that the fall was overdone.
While the last three years has been tough for CMC Markets shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.
See our latest analysis for CMC Markets
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 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).
CMC Markets saw its EPS decline at a compound rate of 61% per year, over the last three years. In comparison the 27% compound annual share price decline isn't as bad as the EPS drop-off. So the market may not be too worried about the EPS figure, at the moment -- or it may have previously priced some of the drop in.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into CMC Markets' key metrics by checking this interactive graph of CMC Markets's 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 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of CMC Markets, it has a TSR of -55% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
While the broader market lost about 1.1% in the twelve months, CMC Markets shareholders did even worse, losing 31% (even including dividends). 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. Longer term investors wouldn't be so upset, since they would have made 12%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand CMC Markets better, we need to consider many other factors. For instance, we've identified 4 warning signs for CMC Markets that you should be aware of.
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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.
