Capita (LON:CPI) shareholders have endured a 77% loss from investing in the stock five years ago
Capita plc (LON:CPI) shareholders should be happy to see the share price up 15% in the last month. But that doesn't change the fact that the returns over the last half decade have been stomach churning. Five years have seen the share price descend precipitously, down a full 86%. The recent bounce might mean the long decline is over, but we are not confident. The important question is if the business itself justifies a higher share price in the long term. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
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.
Check out our latest analysis for Capita
Because Capita made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over half a decade Capita reduced its trailing twelve month revenue by 7.2% for each year. While far from catastrophic that is not good. If a business loses money, you want it to grow, so no surprises that the share price has dropped 13% each year in that time. We're generally averse to companies with declining revenues, but we're not alone in that. 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).
If you are thinking of buying or selling Capita stock, you should check out this FREE detailed report on its balance sheet.
What About The Total Shareholder Return (TSR)?
We've already covered Capita's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Capita shareholders, and that cash payout explains why its total shareholder loss of 77%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
While the broader market lost about 1.2% in the twelve months, Capita shareholders did even worse, losing 13%. 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. However, the loss over the last year isn't as bad as the 12% per annum loss investors have suffered over the last half decade. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. If you would like to research Capita in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
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 GB exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here
