If You Had Bought Helios Underwriting's (LON:HUW) Shares Five Years Ago You Would Be Down 38%

While it may not be enough for some shareholders, we think it is good to see the Helios Underwriting Plc (LON:HUW) share price up 23% in a single 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 38% in that time, significantly under-performing the market.

View our latest analysis for Helios Underwriting

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

During the five years over which the share price declined, Helios Underwriting's earnings per share (EPS) dropped by 5.3% each year. This reduction in EPS is less than the 9% annual reduction in the share price. This implies that the market is more cautious about the business these days. The less favorable sentiment is reflected in its current P/E ratio of 6.51.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Helios Underwriting has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Helios Underwriting's total shareholder return (TSR) and its share price change, which we've covered above. 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. Helios Underwriting's TSR of was a loss of 32% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

Although it hurts that Helios Underwriting returned a loss of 5.3% in the last twelve months, the broader market was actually worse, returning a loss of 7.2%. What is more upsetting is the 6% per annum loss investors have suffered over the last half decade. While the losses are slowing we doubt many shareholders are happy with the stock. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Helios Underwriting (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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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