Yahoo Finance Ricardo (LON:RCDO) Share Prices Have Dropped 55% In The Last Three Years
Ricardo plc (LON:RCDO) shareholders should be happy to see the share price up 23% in the last month. But that doesn't change the fact that the returns over the last three years have been disappointing. Tragically, the share price declined 55% in that time. So the improvement may be a real relief to some. While many would remain nervous, there could be further gains if the business can put its best foot forward.
Check out our latest analysis for Ricardo
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Ricardo saw its share price decline over the three years in which its EPS also dropped, falling to a loss. This was, in part, due to extraordinary items impacting earnings. Due to the loss, it's not easy to use EPS as a reliable guide to the business. But it's safe to say we'd generally expect the share price to be lower as a result!
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Ricardo's total shareholder return (TSR) and its share price change, which we've covered above. 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. Ricardo's TSR of was a loss of 52% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
We regret to report that Ricardo shareholders are down 46% for the year. Unfortunately, that's worse than the broader market decline of 5.4%. 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 7% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Ricardo better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with Ricardo (including 1 which makes us a bit uncomfortable) .
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
This article by Simply Wall St is general in nature. 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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