Inspired (LON:INSE) earnings and shareholder returns have been trending downwards for the last five years, but the stock hikes 19% this past week

It's nice to see the Inspired Plc (LON:INSE) share price up 19% in a week. But that doesn't change the fact that the returns over the last half decade have been stomach churning. In fact, the share price has tumbled down a mountain to land 76% lower after that period. While the recent increase might be a green shoot, we're certainly hesitant to rejoice. The important question is if the business itself justifies a higher share price in the long term.

The recent uptick of 19% could be a positive sign of things to come, so let's take a look at historical fundamentals.

View our latest analysis for Inspired

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Inspired became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.

The most recent dividend was actually lower than it was in the past, so that may have sent the share price lower.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We know that Inspired has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think Inspired will earn in the future (free profit forecasts).

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. We note that for Inspired the TSR over the last 5 years was -73%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 13% in the last year, Inspired shareholders lost 27% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 12% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 6 warning signs with Inspired , and understanding them should be part of your investment process.

Of course Inspired 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.