The past three-year earnings decline for Genuit Group (LON:GEN) likely explains shareholders long-term losses

While it may not be enough for some shareholders, we think it is good to see the Genuit Group plc (LON:GEN) share price up 13% in a single quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. After all, the share price is down 12% in the last three years, significantly under-performing the market.

On a more encouraging note the company has added UK£40m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

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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.

During the three years that the share price fell, Genuit Group's earnings per share (EPS) dropped by 6.9% each year. In comparison the 4% compound annual share price decline isn't as bad as the EPS drop-off. So, despite the prior disappointment, shareholders must have some confidence the situation will improve, longer term.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

It might be well worthwhile taking a look at our free report on Genuit Group'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. We note that for Genuit Group the TSR over the last 3 years was -2.7%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in Genuit Group had a tough year, with a total loss of 7.7% (including dividends), against a market gain of about 7.5%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 0.3% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Genuit Group , and understanding them should be part of your investment process.

Of course Genuit Group 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 British 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.