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City Chic Collective Limited (ASX:CCX) shareholders might be concerned after seeing the share price drop 27% in the last quarter. But that doesn't undermine the fantastic longer term performance (measured over five years). Indeed, the share price is up a whopping 446% in that time. Arguably, the recent fall is to be expected after such a strong rise. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 70% decline over the last twelve months.
Since the long term performance has been good but there's been a recent pullback of 26%, let's check if the fundamentals match the share price.
View our latest analysis for City Chic Collective
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 five years of share price growth, City Chic Collective moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. We can see that the City Chic Collective share price is down 17% in the last three years. During the same period, EPS grew by 7.8% each year. It would appear there's a real mismatch between the increasing EPS and the share price, which has declined -6% a year for three years.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About The Total Shareholder Return (TSR)?
We've already covered City Chic Collective's share price action, but we should also mention its total shareholder return (TSR). 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. Dividends have been really beneficial for City Chic Collective shareholders, and that cash payout contributed to why its TSR of 470%, over the last 5 years, is better than the share price return.