Barnes Group's (NYSE:B) five-year decline in earnings translates into losses for shareholders

While it may not be enough for some shareholders, we think it is good to see the Barnes Group Inc. (NYSE:B) share price up 15% in a single quarter. But if you look at the last five years the returns have not been good. After all, the share price is down 26% in that time, significantly under-performing the market.

On a more encouraging note the company has added US$71m 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.

Check out our latest analysis for Barnes Group

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

During the five years over which the share price declined, Barnes Group's earnings per share (EPS) dropped by 50% each year. The share price decline of 6% per year isn't as bad as the EPS decline. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline. The high P/E ratio of 427.22 suggests that shareholders believe earnings will grow in the years ahead.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. It might be well worthwhile taking a look at our free report on Barnes Group's earnings, revenue and cash flow.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Barnes Group's TSR for the last 5 years was -20%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

While the broader market gained around 24% in the last year, Barnes Group shareholders lost 2.8% (even including dividends). 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. Unfortunately, longer term shareholders are suffering worse, given the loss of 4% doled out over the last five years. 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 Barnes Group better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 4 warning signs with Barnes Group (at least 2 which are potentially serious) , and understanding them should be part of your investment process.

Barnes Group is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been buying.

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

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