Reflecting on Liberty Two Degrees' (JSE:L2D) Share Price Returns Over The Last Three Years

This week we saw the Liberty Two Degrees Limited (JSE:L2D) share price climb by 14%. But that doesn't help the fact that the three year return is less impressive. Truth be told the share price declined 53% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

Check out our latest analysis for Liberty Two Degrees

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 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).

Liberty Two Degrees saw its share price decline over the three years in which its EPS also dropped, falling to a loss. This was, in part, due to extraordinary items impacting earnings. Due to the loss, it's not easy to use EPS as a reliable guide to the business. However, we can say we'd expect to see a falling share price in this scenario.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Liberty Two Degrees' earnings, revenue and cash flow.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Liberty Two Degrees' total shareholder return (TSR) and its share price change, which we've covered above. 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 Liberty Two Degrees shareholders, and that cash payout explains why its total shareholder loss of 40%, over the last 3 years, isn't as bad as the share price return.

A Different Perspective

The last twelve months weren't great for Liberty Two Degrees shares, which cost holders 29%, while the market was up about 12%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 12% per year isn't as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. It's always interesting to track share price performance over the longer term. But to understand Liberty Two Degrees better, we need to consider many other factors. Take risks, for example - Liberty Two Degrees has 3 warning signs (and 1 which is concerning) we think you should know about.

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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