While it may not be enough for some shareholders, we think it is good to see the Standard Life Aberdeen plc (LON:SLA) share price up 15% in a single quarter. But that cannot eclipse the less-than-impressive returns over the last three years. Truth be told the share price declined 43% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Standard Life Aberdeen has made a profit in the past. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. Other metrics might give us a better handle on how its value is changing over time.
It's quite likely that the declining dividend has caused some investors to sell their shares, pushing the price lower in the process. This situation was no doubt compounded by the fact revenue is down 32% per year over three years.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
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. If you are thinking of buying or selling Standard Life Aberdeen stock, you should check out this free report showing analyst profit forecasts.
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 Standard Life Aberdeen, it has a TSR of -15% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Although it hurts that Standard Life Aberdeen returned a loss of 4.5% in the last twelve months, the broader market was actually worse, returning a loss of 6.8%. Longer term investors wouldn't be so upset, since they would have made 2%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. 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. Take risks, for example - Standard Life Aberdeen has 1 warning sign we think you should be aware of.
Standard Life Aberdeen 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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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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