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We think intelligent long term investing is the way to go. But no-one is immune from buying too high. To wit, the SNC-Lavalin Group Inc. (TSE:SNC) share price managed to fall 53% over five long years. We certainly feel for shareholders who bought near the top. And it's not just long term holders hurting, because the stock is down 23% in the last year. The falls have accelerated recently, with the share price down 23% in the last three months.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
See our latest analysis for SNC-Lavalin 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).
SNC-Lavalin Group became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.
We don't think that the 0.3% is big factor in the share price, since it's quite small, as dividends go. It could be that the revenue decline of 7.2% per year is viewed as evidence that SNC-Lavalin Group is shrinking. That could explain the weak share price.
The graphic below depicts how earnings and revenue have 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. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So it makes a lot of sense to check out what analysts think SNC-Lavalin Group will earn in the future (free profit forecasts).
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. We note that for SNC-Lavalin Group the TSR over the last 5 years was -50%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!