The five-year decline in earnings for Genuit Group LON:GEN) isn't encouraging, but shareholders are still up 90% over that period

By
Simply Wall St
Published
January 22, 2022
LSE:GEN
Source: Shutterstock

While Genuit Group plc (LON:GEN) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 13% in the last quarter. Looking further back, the stock has generated good profits over five years. After all, the share price is up a market-beating 72% in that time.

In light of the stock dropping 3.8% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

View our latest analysis for Genuit Group

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...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Genuit Group's earnings per share are down 6.1% per year, despite strong share price performance over five years.

Essentially, it doesn't seem likely that investors are focused on EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We doubt the modest 1.4% dividend yield is attracting many buyers to the stock. The revenue growth of 2.8% per year hardly seems impressive. So why is the share price up? It's not immediately obvious to us, but a closer look at the company's progress over time might yield answers.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
LSE:GEN Earnings and Revenue Growth January 22nd 2022

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. So it makes a lot of sense to check out what analysts think Genuit Group will earn in the future (free profit forecasts).

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Genuit Group the TSR over the last 5 years was 90%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Genuit Group shareholders have received returns of 12% over twelve months (even including dividends), which isn't far from the general market return. It has to be noted that the recent return falls short of the 14% shareholders have gained each year, over half a decade. Although the share price growth has slowed, the longer term story points to a business well worth watching. It's always interesting to track share price performance over the longer term. But to understand Genuit Group better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Genuit Group you should be aware of.

Genuit Group 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 GB exchanges.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.