M&G (LON:MNG) pulls back 4.9% this week, but still delivers shareholders solid 20% CAGR over 5 years

If you buy and hold a stock for many years, you'd hope to be making a profit. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the M&G plc (LON:MNG) share price is up 63% in the last five years, that's less than the market return. However, more recent buyers should be happy with the increase of 20% over the last year.

Since the long term performance has been good but there's been a recent pullback of 4.9%, let's check if the fundamentals match the share price.

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M&G wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually desire strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

In the last 5 years M&G saw its revenue shrink by 32% per year. The falling revenue is arguably somewhat reflected in the lacklustre return of 10% per year over that time. That's pretty decent given the top line decline, and lack of profits. We'd keep an eye on changes in the trend - there may be an opportunity if the company returns to growth.

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

Take a more thorough look at M&G's financial health with this free report on its balance sheet.

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. In the case of M&G, it has a TSR of 150% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that M&G shareholders have received a total shareholder return of 32% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 20%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand M&G better, we need to consider many other factors. Even so, be aware that M&G is showing 1 warning sign in our investment analysis , you should know about...

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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.