Lifestyle Communities' (ASX:LIC) one-year decline in earnings translates into losses for shareholders

While it may not be enough for some shareholders, we think it is good to see the Lifestyle Communities Limited (ASX:LIC) share price up 11% in a single quarter. But that doesn't change the reality of under-performance over the last twelve months. After all, the share price is down 42% in the last year, significantly under-performing the market.

While the stock has risen 7.1% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

See our latest analysis for Lifestyle Communities

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Unhappily, Lifestyle Communities had to report a 42% decline in EPS over the last year. Remarkably, he share price decline of 42% per year is particularly close to the EPS drop. So it seems that the market sentiment has not changed much, despite the weak results. Instead, the change in the share price seems to reduction in earnings per share, alone.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on Lifestyle Communities' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

A Different Perspective

Lifestyle Communities shareholders are down 41% for the year (even including dividends), but the market itself is up 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 5%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 3 warning signs for Lifestyle Communities you should be aware of.

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.