Investors in Town Centre Securities (LON:TOWN) from five years ago are still down 30%, even after 16% gain this past week

Town Centre Securities Plc (LON:TOWN) shareholders should be happy to see the share price up 19% in the last month. But over the last half decade, the stock has not performed well. After all, the share price is down 44% in that time, significantly under-performing the market.

On a more encouraging note the company has added UK£9.2m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

View our latest analysis for Town Centre Securities

Town Centre Securities wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.

Over half a decade Town Centre Securities reduced its trailing twelve month revenue by 3.0% for each year. While far from catastrophic that is not good. The share price decline at a rate of 8% per year is disappointing. Unfortunately, though, it makes sense given the lack of either profits or revenue growth. It might be worth watching for signs of a turnaround - buyers are probably expecting one.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

Balance sheet strength is crucial. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Town Centre Securities the TSR over the last 5 years was -30%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Investors in Town Centre Securities had a tough year, with a total loss of 11% (including dividends), against a market gain of about 0.4%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 5% 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. 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 Town Centre Securities (at least 1 which doesn't sit too well with us) , and understanding them should be part of your investment process.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.