Would Shareholders Who Purchased RCL Foods' (JSE:RCL) Stock Five Years Be Happy With The Share price Today?

RCL Foods Limited (JSE:RCL) shareholders should be happy to see the share price up 14% in the last month. But over the last half decade, the stock has not performed well. You would have done a lot better buying an index fund, since the stock has dropped 51% in that half decade.

Check out our latest analysis for RCL Foods

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

We know that RCL Foods has been profitable in the past. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics might give us a better handle on how its value is changing over time.

Revenue is actually up 2.3% over the time period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.

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

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free report showing analyst forecasts should help you form a view on RCL Foods

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 RCL Foods the TSR over the last 5 years was -45%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that RCL Foods shareholders are down 8.5% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 4.0%. 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. Unfortunately, longer term shareholders are suffering worse, given the loss of 8% 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 RCL Foods better, we need to consider many other factors. For instance, we've identified 2 warning signs for RCL Foods that you should be aware of.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

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

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This article by Simply Wall St is general in nature. 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.
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