Reckon's (ASX:RKN) Stock Price Has Reduced 67% In The Past Five Years

We think intelligent long term investing is the way to go. But unfortunately, some companies simply don't succeed. For example, after five long years the Reckon Limited (ASX:RKN) share price is a whole 67% lower. That is extremely sub-optimal, to say the least.

Check out our latest analysis for Reckon

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 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.

Looking back five years, both Reckon's share price and EPS declined; the latter at a rate of 13% per year. This reduction in EPS is less than the 20% annual reduction in the share price. This implies that the market is more cautious about the business these days. The less favorable sentiment is reflected in its current P/E ratio of 11.06.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Reckon has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Reckon's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Reckon, it has a TSR of -57% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Reckon has rewarded shareholders with a total shareholder return of 12% in the last twelve months. That's including the dividend. That certainly beats the loss of about 10% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. For example, we've discovered 3 warning signs for Reckon that you should be aware of before investing here.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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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