If You Had Bought Estia Health's (ASX:EHE) Shares Five Years Ago You Would Be Down 73%

It is doubtless a positive to see that the Estia Health Limited (ASX:EHE) share price has gained some 32% in the last three months. But don't envy holders -- looking back over 5 years the returns have been really bad. Indeed, the share price is down 73% in the period. So we're not so sure if the recent bounce should be celebrated. Of course, this could be the start of a turnaround.

View our latest analysis for Estia Health

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...' 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.

Estia Health has made a profit in the past. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics may better explain the share price move.

In contrast to the share price, revenue has actually increased by 12% a year in the five year period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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. This free report showing analyst forecasts should help you form a view on Estia Health

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Estia Health's total shareholder return (TSR) and its share price return. 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 Estia Health shareholders, and that cash payout explains why its total shareholder loss of 65%, over the last 5 years, isn't as bad as the share price return.

A Different Perspective

While the broader market gained around 2.8% in the last year, Estia Health shareholders lost 26%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 11% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Estia Health better, we need to consider many other factors. Even so, be aware that Estia Health is showing 1 warning sign in our investment analysis , you should know about...

Estia Health is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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

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This article by Simply Wall St is general in nature. 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.
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