Strix Group's (LON:KETL) earnings trajectory could turn positive as the stock spikes 14% this past week

Strix Group Plc (LON:KETL) shareholders should be happy to see the share price up 14% in the last week. Meanwhile over the last three years the stock has dropped hard. Regrettably, the share price slid 70% in that period. Some might say the recent bounce is to be expected after such a bad drop. While many would remain nervous, there could be further gains if the business can put its best foot forward.

On a more encouraging note the company has added UK£19m to its market cap in just the last 7 days, so let's see if we can determine what's driven the three-year loss for shareholders.

See our latest analysis for Strix Group

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the three years that the share price fell, Strix Group's earnings per share (EPS) dropped by 20% each year. The share price decline of 33% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy. This increased caution is also evident in the rather low P/E ratio, which is sitting at 11.72.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It might be well worthwhile taking a look at our free report on Strix Group's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Strix Group the TSR over the last 3 years was -66%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in Strix Group had a tough year, with a total loss of 36% (including dividends), against a market gain of about 0.4%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7% 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. It's always interesting to track share price performance over the longer term. But to understand Strix Group better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 5 warning signs with Strix Group (at least 1 which is a bit concerning) , and understanding them should be part of your investment process.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.