EML Payments' (ASX:EML) earnings have declined over five years, contributing to shareholders 73% loss

EML Payments Limited (ASX:EML) shareholders should be happy to see the share price up 17% in the last month. But will that heal all the wounds inflicted over 5 years of declines? Unlikely. Like a ship taking on water, the share price has sunk 73% in that time. So we don't gain too much confidence from the recent recovery. The million dollar question is whether the company can justify a long term recovery.

While the stock has risen 12% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During five years of share price growth, EML Payments moved from a loss to profitability. 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.

Revenue is actually up 11% over the time period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.

The graphic below depicts how earnings and revenue have 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. So it makes a lot of sense to check out what analysts think EML Payments will earn in the future (free profit forecasts).

A Different Perspective

EML Payments' TSR for the year was broadly in line with the market average, at 10%. To take a positive view, the gain is pleasing, and it sure beats annualized TSR loss of 12%, which was endured over half a decade. While 'turnarounds seldom turn' there are green shoots for EML Payments. It's always interesting to track share price performance over the longer term. But to understand EML Payments better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with EML Payments , and understanding them should be part of your investment process.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian exchanges.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.