Yahoo Finance RMR Group (NASDAQ:RMR) shareholders have endured a 35% loss from investing in the stock five years ago
The RMR Group Inc. (NASDAQ:RMR) shareholders should be happy to see the share price up 14% in the last quarter. But that doesn't change the fact that the returns over the last five years have been less than pleasing. In fact, the share price is down 55%, which falls well short of the return you could get by buying an index fund.
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.
View our latest analysis for RMR Group
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the five years over which the share price declined, RMR Group's earnings per share (EPS) dropped by 5.1% each year. This reduction in EPS is less than the 15% annual reduction in the share price. So it seems the market was too confident about the business, in the past.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of RMR Group, it has a TSR of -35% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Although it hurts that RMR Group returned a loss of 9.3% in the last twelve months, the broader market was actually worse, returning a loss of 15%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's worse than the annualised loss of 6% over the last half decade. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 1 warning sign for RMR Group 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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