Yahoo Finance Rolls-Royce Holdings (LON:RR.) investors are sitting on a loss of 51% if they invested five years ago
Rolls-Royce Holdings plc (LON:RR.) shareholders will doubtless be very grateful to see the share price up 57% in the last quarter. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. In fact, the share price has declined rather badly, down some 84% in that time. So is the recent increase sufficient to restore confidence in the stock? Not yet. However, in the best case scenario (far from fait accompli), this improved performance might be sustained. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
View our latest analysis for Rolls-Royce Holdings
Rolls-Royce Holdings wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over half a decade Rolls-Royce Holdings reduced its trailing twelve month revenue by 7.4% for each year. While far from catastrophic that is not good. If a business loses money, you want it to grow, so no surprises that the share price has dropped 13% each year in that time. It takes a certain kind of mental fortitude (or recklessness) to buy shares in a company that loses money and doesn't grow revenue. Fear of becoming a 'bagholder' may be keeping people away from this stock.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Rolls-Royce Holdings stock, you should check out this free report showing analyst profit forecasts.
What About The Total Shareholder Return (TSR)?
Investors should note that there's a difference between Rolls-Royce Holdings' 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. Rolls-Royce Holdings' TSR of was a loss of 51% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
We're pleased to report that Rolls-Royce Holdings shareholders have received a total shareholder return of 30% over one year. There's no doubt those recent returns are much better than the TSR loss of 9% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. For example, we've discovered 2 warning signs for Rolls-Royce Holdings (1 makes us a bit uncomfortable!) that you should be aware of before investing here.
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 British 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.
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