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Those Who Purchased Realogy Holdings (NYSE:RLGY) Shares Five Years Ago Have A 80% Loss To Show For It

Simply Wall St

Over the last month the Realogy Holdings Corp. (NYSE:RLGY) has been much stronger than before, rebounding by 35%. But will that repair the damage for the weary investors who have owned this stock as it declined over half a decade? Probably not. Like a ship taking on water, the share price has sunk 80% in that time. While the recent increase might be a green shoot, we're certainly hesitant to rejoice. The fundamental business performance will ultimately determine if the turnaround can be sustained.

We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.

See our latest analysis for Realogy Holdings

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 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).

Looking back five years, both Realogy Holdings's share price and EPS declined; the latter at a rate of 32% per year. Notably, the share price has fallen at 28% per year, fairly close to the change in the EPS. This implies that the market has had a fairly steady view of the stock. So it's fair to say the share price has been responding to changes in EPS.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

NYSE:RLGY Past and Future Earnings, October 8th 2019

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Realogy Holdings's earnings, revenue and cash flow.

A Different Perspective

Realogy Holdings shareholders are down 66% for the year (even including dividends) , but the market itself is up 3.7%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 27% over the last half decade. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares - and the price they paid.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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.

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. Thank you for reading.