Shaftesbury's (LON:SHB) Stock Price Has Reduced 45% In The Past Three Years

Shaftesbury PLC (LON:SHB) shareholders should be happy to see the share price up 21% in the last quarter. But that doesn't help the fact that the three year return is less impressive. Truth be told the share price declined 45% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

View our latest analysis for Shaftesbury

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 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).

Shaftesbury saw its share price decline over the three years in which its EPS also dropped, falling to a loss. Due to the loss, it's not easy to use EPS as a reliable guide to the business. But it's safe to say we'd generally expect the share price to be lower as a result!

The company's earnings per share (over time) is 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. Dive deeper into the earnings by checking this interactive graph of Shaftesbury's earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Shaftesbury'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. Its history of dividend payouts mean that Shaftesbury's TSR, which was a 43% drop over the last 3 years, was not as bad as the share price return.

A Different Perspective

While the broader market lost about 2.7% in the twelve months, Shaftesbury shareholders did even worse, losing 39%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% 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 is significant!) 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.

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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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