RFG Holdings (JSE:RFG) earnings and shareholder returns have been trending downwards for the last five years, but the stock rallies 20% this past week

RFG Holdings Limited (JSE:RFG) shareholders should be happy to see the share price up 20% in the last week. But over the last half decade, the stock has not performed well. After all, the share price is down 51% in that time, significantly under-performing the market.

Although the past week has been more reassuring for shareholders, they're still in the red over the last five years, so let's see if the underlying business has been responsible for the decline.

View our latest analysis for RFG Holdings

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 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, RFG Holdings' earnings per share (EPS) dropped by 5.2% each year. This reduction in EPS is less than the 13% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The low P/E ratio of 11.86 further reflects this reticence.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of RFG Holdings, it has a TSR of -47% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

RFG Holdings shareholders are down 8.8% for the year (even including dividends), but the market itself is up 6.1%. 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 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 RFG Holdings better, we need to consider many other factors. Even so, be aware that RFG Holdings is showing 2 warning signs in our investment analysis , and 1 of those shouldn't be ignored...

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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. 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.