The five-year loss for On the Beach Group (LON:OTB) shareholders likely driven by its shrinking earnings

On the Beach Group plc (LON:OTB) shareholders will doubtless be very grateful to see the share price up 38% in the last quarter. But that is little comfort to those holding over the last half decade, sitting on a big loss. In fact, the share price has declined rather badly, down some 54% in that time. So we're hesitant to put much weight behind the short term increase. But it could be that the fall was overdone.

While the stock has risen 27% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.

See our latest analysis for On the Beach Group

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 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.

During five years of share price growth, On the Beach Group moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.

The modest 0.9% dividend yield is unlikely to be guiding the market view of the stock. In contrast to the share price, revenue has actually increased by 15% a year in the five year period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

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

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

We're pleased to report that On the Beach Group shareholders have received a total shareholder return of 50% over one year. And that does include the dividend. Notably the five-year annualised TSR loss of 9% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand On the Beach Group better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for On the Beach Group you should be aware of, and 1 of them shouldn't be ignored.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: most of them are flying under the radar).

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.