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This week we saw the Barratt Redrow plc (LON:BTRW) share price climb by 12%. But that doesn't change the fact that the returns over the last three years have been less than pleasing. In fact, the share price is down 15% in the last three years, falling well short of the market return.
While the stock has risen 12% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
Our free stock report includes 4 warning signs investors should be aware of before investing in Barratt Redrow. Read for free now.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the three years that the share price fell, Barratt Redrow's earnings per share (EPS) dropped by 49% each year. In comparison the 5% compound annual share price decline isn't as bad as the EPS drop-off. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. With a P/E ratio of 52.06, it's fair to say the market sees a brighter future for the business.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Barratt Redrow's key metrics by checking this interactive graph of Barratt Redrow's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Barratt Redrow's TSR for the last 3 years was 2.9%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Barratt Redrow shareholders gained a total return of 2.1% during the year. But that was short of the market average. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 4% over five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. It's always interesting to track share price performance over the longer term. But to understand Barratt Redrow better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for Barratt Redrow you should be aware of, and 2 of them are significant.