Yahoo Finance Investing in Reckon (ASX:RKN) three years ago would have delivered you a 46% gain
One of the frustrations of investing is when a stock goes down. But it's hard to avoid some disappointing investments when the overall market is down. The Reckon Limited (ASX:RKN) is down 29% over three years, but the total shareholder return is 46% once you include the dividend. That's better than the market which returned 26% over the last three years.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out our latest analysis for Reckon
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.
Reckon saw its EPS decline at a compound rate of 12% per year, over the last three years. This change in EPS is reasonably close to the 11% average annual decrease in the share price. So it seems that investor expectations of the company are staying pretty steady, despite the disappointment. Rather, the share price has approximately tracked EPS growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Reckon's key metrics by checking this interactive graph of Reckon's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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 Reckon, it has a TSR of 46% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Reckon shareholders gained a total return of 2.8% during the year. Unfortunately this falls short of the market return. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 14% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand Reckon better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Reckon , and understanding them should be part of your investment process.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian 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.
