No-one enjoys it when they lose money on a stock. But when the market is down, you're bound to have some losers. While the RM Secured Direct Lending plc (LON:RMDL) share price is down 23% in the last three years, the total return to shareholders (which includes dividends) was -4.9%. And that total return actually beats the market decline of 7.0%. Unhappily, the share price slid 1.9% in the last week.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Over the three years that the share price declined, RM Secured Direct Lending's earnings per share (EPS) dropped significantly, falling to a loss. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. However, we can say we'd expect to see a falling share price in this scenario.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into RM Secured Direct Lending's key metrics by checking this interactive graph of RM Secured Direct Lending's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for RM Secured Direct Lending the TSR over the last 3 years was -4.9%, 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
RM Secured Direct Lending shareholders are down 16% for the year (even including dividends), falling short of the market return. The market shed around 11%, no doubt weighing on the stock price. Shareholders have lost 1.6% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. It's always interesting to track share price performance over the longer term. But to understand RM Secured Direct Lending better, we need to consider many other factors. Even so, be aware that RM Secured Direct Lending is showing 4 warning signs in our investment analysis , and 1 of those is potentially serious...
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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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