RE/MAX Holdings (NYSE:RMAX investor five-year losses grow to 66% as the stock sheds US$31m this past week

We think intelligent long term investing is the way to go. But unfortunately, some companies simply don't succeed. To wit, the RE/MAX Holdings, Inc. (NYSE:RMAX) share price managed to fall 70% over five long years. That's not a lot of fun for true believers. On top of that, the share price is down 13% in the last week.

If the past week is anything to go by, investor sentiment for RE/MAX Holdings isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for RE/MAX Holdings

RE/MAX Holdings isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over five years, RE/MAX Holdings grew its revenue at 4.8% per year. That's far from impressive given all the money it is losing. Nonetheless, it's fair to say the rapidly declining share price (down 11%, compound, over five years) suggests the market is very disappointed with this level of growth. We'd be pretty cautious about this one, although the sell-off may be too severe. A company like this generally needs to produce profits before it can find favour with new investors.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About The Total Shareholder Return (TSR)?

We've already covered RE/MAX Holdings' share price action, but we should also mention its total shareholder return (TSR). 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. Dividends have been really beneficial for RE/MAX Holdings shareholders, and that cash payout explains why its total shareholder loss of 66%, over the last 5 years, isn't as bad as the share price return.

A Different Perspective

RE/MAX Holdings shareholders are up 18% for the year. But that return falls short of the market. But at least that's still a gain! Over five years the TSR has been a reduction of 11% per year, over five years. It could well be that the business is stabilizing. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with RE/MAX Holdings (at least 2 which are significant) , and understanding them should be part of your investment process.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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

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

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.