What Are The Total Returns Earned By Shareholders Of Castings (LON:CGS) On Their Investment?

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Castings P.L.C. (LON:CGS), since the last five years saw the share price fall 23%. Contrary to the longer term story, the last month has been good for stockholders, with a share price gain of 9.9%.

View our latest analysis for Castings

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 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).

During the five years over which the share price declined, Castings' earnings per share (EPS) dropped by 25% each year. The share price decline of 5% per year isn't as bad as the EPS decline. So the market may previously have expected a drop, or else it expects the situation will improve.

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

Dive deeper into Castings' key metrics by checking this interactive graph of Castings'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). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Castings' TSR for the last 5 years was 2.1%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While it's certainly disappointing to see that Castings shares lost 5.6% throughout the year, that wasn't as bad as the market loss of 6.3%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 0.4% for each year. 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. Case in point: We've spotted 3 warning signs for Castings you should be aware of, and 1 of them is significant.

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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