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Ideally, your overall portfolio should beat the market average. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in RM Infrastructure Income PLC (LON:RMII), since the last five years saw the share price fall 30%.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for RM Infrastructure Income
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the five years over which the share price declined, RM Infrastructure Income's earnings per share (EPS) dropped by 14% each year. The share price decline of 7% per year isn't as bad as the EPS decline. The relatively muted share price reaction might be because the market expects the business to turn around.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
This free interactive report on RM Infrastructure Income's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, RM Infrastructure Income's TSR for the last 5 years was 6.6%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We're pleased to report that RM Infrastructure Income shareholders have received a total shareholder return of 13% over one year. And that does include the dividend. That's better than the annualised return of 1.3% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 4 warning signs we've spotted with RM Infrastructure Income (including 2 which can't be ignored) .