Yahoo Finance ProAssurance (NYSE:PRA) shareholders have endured a 60% loss from investing in the stock five years ago
Generally speaking long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. To wit, the ProAssurance Corporation (NYSE:PRA) share price managed to fall 67% over five long years. That is extremely sub-optimal, to say the least. Furthermore, it's down 14% in about a quarter. That's not much fun for holders. However, one could argue that the price has been influenced by the general market, which is down 8.4% in the same timeframe.
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.
View our latest analysis for ProAssurance
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 five years over which the share price declined, ProAssurance's earnings per share (EPS) dropped by 34% each year. This fall in the EPS is worse than the 20% compound annual share price fall. The relatively muted share price reaction might be because the market expects the business to turn around. The high P/E ratio of 59.68 suggests that shareholders believe earnings will grow in the years ahead.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on ProAssurance's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for ProAssurance the TSR over the last 5 years was -60%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Although it hurts that ProAssurance returned a loss of 17% in the last twelve months, the broader market was actually worse, returning a loss of 21%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's worse than the annualised loss of 10% over the last half decade. Whilst Baron Rothschild does tell the investor "buy when there's blood in the streets, even if the blood is your own", buyers would need to examine the data carefully to be comfortable that the business itself is sound. It's always interesting to track share price performance over the longer term. But to understand ProAssurance better, we need to consider many other factors. For instance, we've identified 2 warning signs for ProAssurance that you should be aware of.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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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