Informa's(LON:INF) Share Price Is Down 23% Over The Past Three Years.

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But if you try your hand at stock picking, your risk returning less than the market. Unfortunately, that's been the case for longer term Informa plc (LON:INF) shareholders, since the share price is down 23% in the last three years, falling well short of the market decline of around 11%. Contrary to the longer term story, the last month has been good for stockholders, with a share price gain of 8.8%.

Check out our latest analysis for Informa

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

Informa saw its share price decline over the three years in which its EPS also dropped, falling to a loss. This was, in part, due to extraordinary items impacting earnings. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. But it's safe to say we'd generally expect the share price to be lower as a result!

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

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Informa's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

We've already covered Informa's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Informa shareholders, and that cash payout explains why its total shareholder loss of 18%, over the last 3 years, isn't as bad as the share price return.

A Different Perspective

Investors in Informa had a tough year, with a total loss of 18%, against a market gain of about 8.0%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.8% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Informa better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Informa (of which 1 is a bit concerning!) you should know about.

Informa is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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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