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If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. Long term U and I Group PLC (LON:UAI) shareholders know that all too well, since the share price is down considerably over three years. Unfortunately, they have held through a 63% decline in the share price in that time. The falls have accelerated recently, with the share price down 11% in the last three months.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Given that U and I Group didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last three years U and I Group saw its revenue shrink by 59% per year. That's definitely a weaker result than most pre-profit companies report. Arguably, the market has responded appropriately to this business performance by sending the share price down 18% (annualized) in the same time period. When revenue is dropping, and losses are still costing, and the share price sinking fast, it's fair to ask if something is remiss. It could be a while before the company repays long suffering shareholders with share price gains.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. You can see what analysts are predicting for U and I Group in this interactive graph of future profit estimates.
What about the Total Shareholder Return (TSR)?
We've already covered U and I Group's 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. Its history of dividend payouts mean that U and I Group's TSR, which was a 60% drop over the last 3 years, was not as bad as the share price return.
A Different Perspective
We're pleased to report that U and I Group shareholders have received a total shareholder return of 48% over one year. Notably the five-year annualised TSR loss of 7% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It's always interesting to track share price performance over the longer term. But to understand U and I Group better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for U and I Group 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 GB exchanges.
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.
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