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Statistically speaking, long term investing is a profitable endeavour. But no-one is immune from buying too high. Zooming in on an example, the Ryman Healthcare Limited (NZSE:RYM) share price dropped 73% in the last half decade. We certainly feel for shareholders who bought near the top. We also note that the stock has performed poorly over the last year, with the share price down 22%.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for Ryman Healthcare
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...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Over five years Ryman Healthcare's earnings per share dropped significantly, falling to a loss, with the share price also lower. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. But we would generally expect a lower price, given the situation.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About The Total Shareholder Return (TSR)?
We've already covered Ryman Healthcare's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Ryman Healthcare shareholders, and that cash payout explains why its total shareholder loss of 69%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
Ryman Healthcare shareholders are down 22% for the year, but the market itself is up 12%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Ryman Healthcare better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Ryman Healthcare you should be aware of.