It hasn't been the best quarter for Redcentric plc (LON:RCN) shareholders, since the share price has fallen 13% in that time. But that doesn't change the fact that the returns over the last three years have been pleasing. After all, the share price is up a market-beating 62% in that time.
Redcentric 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. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Redcentric actually saw its revenue drop by 6.7% per year over three years. Despite the lack of revenue growth, the stock has returned 17%, compound, over three years. Unless the company is going to make profits soon, we would be pretty cautious about it.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at Redcentric's financial health with this free report on its balance sheet.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Redcentric's total shareholder return (TSR) and its share price change, which we've covered above. 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. Dividends have been really beneficial for Redcentric shareholders, and that cash payout contributed to why its TSR of 66%, over the last 3 years, is better than the share price return.
A Different Perspective
We're pleased to report that Redcentric shareholders have received a total shareholder return of 54% over one year. There's no doubt those recent returns are much better than the TSR loss of 6% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. It's always interesting to track share price performance over the longer term. But to understand Redcentric better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with Redcentric .
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.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email firstname.lastname@example.org.