Stock Analysis

Shaftesbury (LON:SHB) sheds UK£67m, company earnings and investor returns have been trending downwards for past five years

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LSE:SHB
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We think intelligent long term investing is the way to go. But no-one is immune from buying too high. For example, after five long years the Shaftesbury PLC (LON:SHB) share price is a whole 64% lower. We certainly feel for shareholders who bought near the top. And we doubt long term believers are the only worried holders, since the stock price has declined 41% over the last twelve months. Shareholders have had an even rougher run lately, with the share price down 11% in the last 90 days. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.

Check out our latest analysis for Shaftesbury

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Shaftesbury moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.

Revenue is actually up 0.01% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
LSE:SHB Earnings and Revenue Growth December 1st 2022

It is of course excellent to see how Shaftesbury has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, Shaftesbury's TSR for the last 5 years was -61%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While the broader market lost about 2.4% in the twelve months, Shaftesbury shareholders did even worse, losing 41% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Shaftesbury better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Shaftesbury (of which 1 can't be ignored!) you should know about.

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.

Valuation is complex, but we're helping make it simple.

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