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Genus plc (LON:GNS) shareholders should be happy to see the share price up 20% in the last month. 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 49% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
While the stock has risen 3.9% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
Check out our latest analysis for Genus
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Genus saw its EPS decline at a compound rate of 45% per year, over the last three years. This fall in the EPS is worse than the 20% compound annual share price fall. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term. With a P/E ratio of 153.33, it's fair to say the market sees a brighter future for the business.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Genus' earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Genus the TSR over the last 3 years was -46%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
While the broader market gained around 13% in the last year, Genus shareholders lost 12% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 7% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Genus better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Genus , and understanding them should be part of your investment process.