Yahoo Finance Restaurant Group (LON:RTN shareholders incur further losses as stock declines 17% this week, taking five-year losses to 76%
Long term investing works well, but it doesn't always work for each individual stock. We don't wish catastrophic capital loss on anyone. For example, we sympathize with anyone who was caught holding The Restaurant Group plc (LON:RTN) during the five years that saw its share price drop a whopping 85%. And some of the more recent buyers are probably worried, too, with the stock falling 59% in the last year. Shareholders have had an even rougher run lately, with the share price down 48% in the last 90 days. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
Given the past week has been tough on shareholders, let's investigate the fundamentals and see what we can learn.
Check out our latest analysis for Restaurant Group
Restaurant Group 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. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over half a decade Restaurant Group reduced its trailing twelve month revenue by 3.8% for each year. While far from catastrophic that is not good. The share price fall of 13% (per year, over five years) is a stern reminder that money-losing companies are expected to grow revenue. 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 below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Restaurant Group is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Restaurant Group in this interactive graph of future profit estimates.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between Restaurant Group's total shareholder return (TSR) and its share price return. 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. Dividends have been really beneficial for Restaurant Group shareholders, and that cash payout explains why its total shareholder loss of 76%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
While the broader market lost about 1.5% in the twelve months, Restaurant Group shareholders did even worse, losing 59%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% 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. 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. Even so, be aware that Restaurant Group is showing 1 warning sign in our investment analysis , you should know about...
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.
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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.
