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Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term Midwich Group plc (LON:MIDW) shareholders. Sadly for them, the share price is down 56% in that time. And the ride hasn't got any smoother in recent times over the last year, with the price 25% lower in that time. Shareholders have had an even rougher run lately, with the share price down 12% in the last 90 days.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for Midwich Group
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).
Although the share price is down over three years, Midwich Group actually managed to grow EPS by 81% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.
It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.
Given the healthiness of the dividend payments, we doubt that they've concerned the market. We like that Midwich Group has actually grown its revenue over the last three years. If the company can keep growing revenue, there may be an opportunity for investors. You might have to dig deeper to understand the recent share price weakness.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. So it makes a lot of sense to check out what analysts think Midwich Group will earn in the future (free profit forecasts).
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, Midwich Group's TSR for the last 3 years was -51%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!