Sigma Healthcare (ASX:SIG) shareholders are up 19% this past week, but still in the red over the last five years
Sigma Healthcare Limited (ASX:SIG) shareholders should be happy to see the share price up 21% in the last month. But if you look at the last five years the returns have not been good. In fact, the share price is down 33%, which falls well short of the return you could get by buying an index fund.
While the stock has risen 19% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
View our latest analysis for Sigma Healthcare
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Over five years Sigma Healthcare's earnings per share dropped significantly, falling to a loss, with the share price also lower. At present it's hard to make valid comparisons between EPS and the share price. But we would generally expect a lower price, given the situation.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Sigma Healthcare's key metrics by checking this interactive graph of Sigma Healthcare'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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Sigma Healthcare's TSR for the last 5 years was -19%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Sigma Healthcare has rewarded shareholders with a total shareholder return of 4.5% in the last twelve months. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 3% per year over five years. 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 for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Sigma Healthcare , and understanding them should be part of your investment process.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.
