Earnings growth of 0.5% over 3 years hasn't been enough to translate into positive returns for FDM Group (Holdings) (LON:FDM) shareholders

If you love investing in stocks you're bound to buy some losers. But the last three years have been particularly tough on longer term FDM Group (Holdings) plc (LON:FDM) shareholders. Unfortunately, they have held through a 68% decline in the share price in that time. The more recent news is of little comfort, with the share price down 59% in a year. Shareholders have had an even rougher run lately, with the share price down 29% in the last 90 days.

With the stock having lost 20% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.

Check out our latest analysis for FDM Group (Holdings)

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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Although the share price is down over three years, FDM Group (Holdings) actually managed to grow EPS by 1.5% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

It's pretty reasonable to suspect the market was previously to bullish on the stock, and has since moderated expectations. But it's possible a look at other metrics will be enlightening.

We note that the dividend has declined - a likely contributor to the share price drop. In contrast it does not seem particularly likely that the revenue levels are a concern for investors.

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

We know that FDM Group (Holdings) has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for FDM Group (Holdings) the TSR over the last 3 years was -64%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market gained around 5.2% in the last year, FDM Group (Holdings) shareholders lost 56% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 9% over the last half decade. 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 FDM Group (Holdings) better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for FDM Group (Holdings) you should be aware of, and 1 of them is a bit unpleasant.

We will like FDM Group (Holdings) better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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

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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.