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As an investor, mistakes are inevitable. But really bad investments should be rare. So take a moment to sympathize with the long term shareholders of Future plc (LON:FUTR), who have seen the share price tank a massive 72% over a three year period. That would certainly shake our confidence in the decision to own the stock.
While the stock has risen 4.1% 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 Future
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 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.
Although the share price is down over three years, Future actually managed to grow EPS by 7.2% per year in that time. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.
Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
The modest 0.3% dividend yield is unlikely to be guiding the market view of the stock. We note that, in three years, revenue has actually grown at a 13% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Future more closely, as sometimes stocks fall unfairly. This could present an opportunity.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. You can see what analysts are predicting for Future in this interactive graph of future profit estimates.
A Different Perspective
It's good to see that Future has rewarded shareholders with a total shareholder return of 49% in the last twelve months. Of course, that includes the dividend. That certainly beats the loss of about 1.5% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. Before spending more time on Future it might be wise to click here to see if insiders have been buying or selling shares.