Investors three-year losses grow to 56% as the stock sheds US$57m this past week

By
Simply Wall St
Published
January 18, 2022
AIM:BUR
Source: Shutterstock

The truth is that if you invest for long enough, you're going to end up with some losing stocks. Long term Burford Capital Limited (LON:BUR) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 57% drop in the share price over that period.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

See our latest analysis for Burford Capital

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over the three years that the share price declined, Burford Capital's earnings per share (EPS) dropped significantly, falling to a loss. Due to the loss, it's not easy to use EPS as a reliable guide to the business. But it's safe to say we'd generally expect the share price to be lower as a result!

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
AIM:BUR Earnings Per Share Growth January 18th 2022

We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Burford Capital's earnings, revenue and cash flow.

A Different Perspective

Burford Capital provided a TSR of 15% over the year (including dividends). That's fairly close to the broader market return. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 3%. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

Burford Capital is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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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