Pulling back 5.0% this week, AB Sagax's STO:SAGA A) five-year decline in earnings may be coming into investors focus

AB Sagax (publ) (STO:SAGA A) shareholders might be concerned after seeing the share price drop 13% in the last month. But that does not change the realty that the stock's performance has been terrific, over five years. Indeed, the share price is up a whopping 345% in that time. So it might be that some shareholders are taking profits after good performance. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.

Since the long term performance has been good but there's been a recent pullback of 5.0%, let's check if the fundamentals match the share price.

View our latest analysis for AB Sagax

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

AB Sagax's earnings per share are down 3.4% per year, despite strong share price performance over five years.

So it's hard to argue that the earnings per share are the best metric to judge the company, as it may not be optimized for profits at this point. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We doubt the modest 1.2% dividend yield is attracting many buyers to the stock. In contrast revenue growth of 12% per year is probably viewed as evidence that AB Sagax is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on AB Sagax

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for AB Sagax the TSR over the last 5 years was 370%, 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

We regret to report that AB Sagax shareholders are down 15% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 10%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 36% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. For example, we've discovered 3 warning signs for AB Sagax (1 doesn't sit too well with us!) that you should be aware of before investing here.

AB Sagax is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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