U.S. Markets close in 1 hr 33 mins

Volatility 101: Should Redcentric (LON:RCN) Shares Have Dropped 44%?

Simply Wall St

While not a mind-blowing move, it is good to see that the Redcentric plc (LON:RCN) share price has gained 12% in the last three months. But that doesn't change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 44% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

View our latest analysis for Redcentric

Given that Redcentric didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last three years Redcentric saw its revenue shrink by 3.2% per year. That is not a good result. The annual decline of 18% per year in that period has clearly disappointed holders. That makes sense given the lack of either profits or revenue growth. Of course, sentiment could become too negative, and the company may actually be making progress to profitability.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

AIM:RCN Income Statement, October 21st 2019

If you are thinking of buying or selling Redcentric stock, you should check out this FREE detailed report on its balance sheet.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Redcentric's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Redcentric's TSR of was a loss of 43% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

Redcentric shareholders gained a total return of 4.4% during the year. But that was short of the market average. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 4.8% endured over half a decade. It could well be that the business is stabilizing. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

If you are like me, then you will 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 GB 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.