Yahoo Finance The three-year shareholder returns and company earnings persist lower as Close Brothers Group (LON:CBG) stock falls a further 4.7% in past week
Close Brothers Group plc (LON:CBG) shareholders should be happy to see the share price up 14% in the last quarter. But that doesn't help the fact that the three year return is less impressive. In fact, the share price is down 32% in the last three years, falling well short of the market return.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
View our latest analysis for Close Brothers Group
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the three years that the share price fell, Close Brothers Group's earnings per share (EPS) dropped by 6.0% each year. The share price decline of 12% is actually steeper than the EPS slippage. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 9.63.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
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. 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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Close Brothers Group the TSR over the last 3 years was -22%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
While the broader market lost about 1.4% in the twelve months, Close Brothers Group shareholders did even worse, losing 18% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 1.6% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Close Brothers Group better, we need to consider many other factors. Take risks, for example - Close Brothers Group has 2 warning signs we think you should be aware of.
Close Brothers Group is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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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