Investors five-year losses continue as Prosegur Compañía de Seguridad (BME:PSG) dips a further 15% this week, earnings continue to decline

Generally speaking long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. Zooming in on an example, the Prosegur Compañía de Seguridad, S.A. (BME:PSG) share price dropped 68% in the last half decade. That's an unpleasant experience for long term holders. And the share price decline continued over the last week, dropping some 15%.

With the stock having lost 15% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for Prosegur Compañía de Seguridad

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.

Looking back five years, both Prosegur Compañía de Seguridad's share price and EPS declined; the latter at a rate of 11% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 20% per year, over the period. So it seems the market was too confident about the business, in the past.

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

Dive deeper into Prosegur Compañía de Seguridad's key metrics by checking this interactive graph of Prosegur Compañía de Seguridad's earnings, revenue and cash flow.

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Prosegur Compañía de Seguridad's TSR for the last 5 years was -60%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Investors in Prosegur Compañía de Seguridad had a tough year, with a total loss of 8.8% (including dividends), against a market gain of about 23%. 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. However, the loss over the last year isn't as bad as the 10% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Prosegur Compañía de Seguridad better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Prosegur Compañía de Seguridad you should be aware of, and 1 of them shouldn't be ignored.

Of course Prosegur Compañía de Seguridad may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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