Rentokil Initial (LON:RTO) earnings and shareholder returns have been trending downwards for the last five years, but the stock lifts 7.6% this past week

While not a mind-blowing move, it is good to see that the Rentokil Initial plc (LON:RTO) share price has gained 15% in the last three months. But if you look at the last five years the returns have not been good. In fact, the share price is down 28%, which falls well short of the return you could get by buying an index fund.

On a more encouraging note the company has added UK£702m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

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In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Looking back five years, both Rentokil Initial's share price and EPS declined; the latter at a rate of 6.0% per year. In this case, the EPS change is really very close to the share price drop of 6% a year. This implies that the market has had a fairly steady view of the stock. Rather, the share price change has reflected changes in earnings per share.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Rentokil Initial'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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Rentokil Initial the TSR over the last 5 years was -21%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Rentokil Initial shareholders gained a total return of 13% during the year. But that was short of the market average. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 4% endured over half a decade. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand Rentokil Initial better, we need to consider many other factors. For instance, we've identified 4 warning signs for Rentokil Initial (1 shouldn't be ignored) that you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.