Pendragon's(LON:PDG) Share Price Is Down 77% Over The Past Five Years.

Pendragon PLC (LON:PDG) shareholders will doubtless be very grateful to see the share price up 47% in the last quarter. But that doesn't change the fact that the returns over the last half decade have been stomach churning. Five years have seen the share price descend precipitously, down a full 77%. The recent bounce might mean the long decline is over, but we are not confident. The important question is if the business itself justifies a higher share price in the long term.

See our latest analysis for Pendragon

Pendragon 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. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last five years Pendragon saw its revenue shrink by 4.1% per year. While far from catastrophic that is not good. The share price fall of 12% (per year, over five years) is a stern reminder that money-losing companies are expected to grow revenue. We're generally averse to companies with declining revenues, but we're not alone in that. Fear of becoming a 'bagholder' may be keeping people away from this stock.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

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 the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Pendragon's total shareholder return (TSR) and its share price change, which we've covered above. 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. Pendragon's TSR of was a loss of 73% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.

A Different Perspective

We regret to report that Pendragon shareholders are down 16% for the year. Unfortunately, that's worse than the broader market decline of 7.5%. 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. However, the loss over the last year isn't as bad as the 12% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. It's always interesting to track share price performance over the longer term. But to understand Pendragon better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Pendragon you should be aware of, and 1 of them is a bit unpleasant.

But note: Pendragon may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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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