Stock Analysis

Reflecting on Safestyle UK's (LON:SFE) Share Price Returns Over The Last Five Years

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AIM:SFE
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It is a pleasure to report that the Safestyle UK plc (LON:SFE) is up 46% in the last quarter. But spare a thought for the long term holders, who have held the stock as it bled value over the last five years. In fact, the share price has tumbled down a mountain to land 83% lower after that period. 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.

We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

View our latest analysis for Safestyle UK

Because Safestyle UK made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last five years Safestyle UK saw its revenue shrink by 6.6% per year. While far from catastrophic that is not good. If a business loses money, you want it to grow, so no surprises that the share price has dropped 13% each year in that time. It takes a certain kind of mental fortitude (or recklessness) to buy shares in a company that loses money and doesn't grow revenue. Fear of becoming a 'bagholder' may be keeping people away from this stock.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
AIM:SFE Earnings and Revenue Growth February 5th 2021

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Safestyle UK stock, you should check out this free report showing analyst profit forecasts.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Safestyle UK'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. Safestyle UK's TSR of was a loss of 81% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

While the broader market lost about 5.1% in the twelve months, Safestyle UK shareholders did even worse, losing 14%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. However, the loss over the last year isn't as bad as the 13% 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. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - Safestyle UK has 3 warning signs (and 1 which is concerning) we think you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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

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