If You Had Bought Sanderson Design Group's (LON:SDG) Shares Five Years Ago You Would Be Down 54%

It is a pleasure to report that the Sanderson Design Group plc (LON:SDG) is up 50% in the last quarter. But that doesn't change the fact that the returns over the last five years have been less than pleasing. After all, the share price is down 54% in that time, significantly under-performing the market.

See our latest analysis for Sanderson Design Group

While Sanderson Design Group made a small profit, in the last year, we think that the market is probably more focussed on the top line growth at the moment. As a general rule, we think this kind of company is more comparable to loss-making stocks, since the actual profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

Over five years, Sanderson Design Group grew its revenue at 5.2% per year. That's not a very high growth rate considering it doesn't make profits. This lacklustre growth has no doubt fueled the loss of 9% per year, in that time. We want to see an acceleration of revenue growth (or profits) before showing much interest in this one. When a stock falls hard like this, some investors like to add the company to a watchlist (in case the business recovers, longer term).

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

This free interactive report on Sanderson Design Group's balance sheet strength is a great place to start, if you want to investigate the stock further.

What about the Total Shareholder Return (TSR)?

We've already covered Sanderson Design Group's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Sanderson Design Group shareholders, and that cash payout explains why its total shareholder loss of 49%, over the last 5 years, isn't as bad as the share price return.

A Different Perspective

It's good to see that Sanderson Design Group has rewarded shareholders with a total shareholder return of 9.4% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 8% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. 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. For example, we've discovered 4 warning signs for Sanderson Design Group that you should be aware of before investing here.

But note: Sanderson Design Group may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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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This article by Simply Wall St is general in nature. 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.
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