Rathbones Group (LON:RAT) investors are sitting on a loss of 1.5% if they invested five years ago

Rathbones Group Plc (LON:RAT) shareholders should be happy to see the share price up 14% 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 21% in that time, significantly under-performing the market.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

See our latest analysis for Rathbones Group

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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).

Looking back five years, both Rathbones Group's share price and EPS declined; the latter at a rate of 16% per year. This fall in the EPS is worse than the 5% compound annual share price fall. The relatively muted share price reaction might be because the market expects the business to turn around. With a P/E ratio of 48.00, it's fair to say the market sees a brighter future for the business.

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

It might be well worthwhile taking a look at our free report on Rathbones Group's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for Rathbones Group the TSR over the last 5 years was -1.5%, 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

Rathbones Group shareholders are up 0.7% for the year (even including dividends). Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 0.3% endured over half a decade. It could well be that the business is stabilizing. 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 5 warning signs for Rathbones Group (2 are potentially serious!) that you should be aware of before investing here.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com