It hasn't been the best quarter for RE&S Holdings Limited (Catalist:1G1) shareholders, since the share price has fallen 11% in that time. But that shouldn't obscure the pleasing returns achieved by shareholders over the last three years. To wit, the share price did better than an index fund, climbing 48% during that period.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
Check out our latest analysis for RE&S Holdings
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the three years of share price growth, RE&S Holdings actually saw its earnings per share (EPS) drop 9.0% per year.
So we doubt that the market is looking to EPS for its main judge of the company's value. Given this situation, it makes sense to look at other metrics too.
We note that the dividend is higher than it was preciously, so that may have assisted the share price. Sometimes yield-chasing investors will flock to a company if they think the dividend can grow over time. On top of that, revenue grew at a rate of 17% per year, and it's likely investors interpret that as pointing to a brighter future.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
As well as measuring the share price return, investors should also consider the 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, RE&S Holdings' TSR for the last 3 years was 82%, 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
Investors in RE&S Holdings had a tough year, with a total loss of 11% (including dividends), against a market gain of about 0.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 9%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand RE&S Holdings better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for RE&S Holdings you should know about.