Those Who Purchased Law Debenture (LON:LWDB) Shares A Year Ago Have A 15% Loss To Show For It
It's normal to be annoyed when stock you own has a declining share price. But sometimes broader market conditions have more of an impact on prices than the actual business performance. So while the The Law Debenture Corporation p.l.c. (LON:LWDB) share price is down 15% in the last year, the total return to shareholders (which includes dividends) was -11%. That's better than the market which returned -23% over the last year. Looking at the longer term, the stock is down 13% over three years. It's down 23% in about a quarter. However, one could argue that the price has been influenced by the general market, which is down 30% in the same timeframe.
View our latest analysis for Law Debenture
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 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.
Law Debenture managed to increase earnings per share from a loss to a profit, over the last 12 months.
We're surprised that the share price is lower given that improvement. If the improved profitability is a sign of things to come, then right now may prove the perfect time to pop this stock on your watchlist.
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 Law Debenture's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Law Debenture, it has a TSR of -11% for the last year. 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
Although it hurts that Law Debenture returned a loss of 11% in the last twelve months, the broader market was actually worse, returning a loss of 23%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 1.6% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. 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. Case in point: We've spotted 1 warning sign for Law Debenture you should be aware of.
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 GB exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
