Strong week for SIG (LON:SHI) shareholders doesn't alleviate pain of five-year loss

Simply Wall St · 10/18 05:01

SIG plc (LON:SHI) shareholders should be happy to see the share price up 13% in the last month. But spare a thought for the long term holders, who have held the stock as it bled value over the last five years. Indeed, the share price is down a whopping 80% in that time. The recent bounce might mean the long decline is over, but we are not confident. The fundamental business performance will ultimately determine if the turnaround can be sustained. We really feel for shareholders in this scenario. It's a good reminder of the importance of diversification, and it's worth keeping in mind there's more to life than money, anyway.

While the last five years has been tough for SIG shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

View our latest analysis for SIG

SIG 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. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one would hope for good top-line growth to make up for the lack of earnings.

In the last half decade, SIG saw its revenue increase by 8.5% per year. That's a pretty good rate for a long time period. So the stock price fall of 13% per year seems pretty steep. The market can be a harsh master when your company is losing money and revenue growth disappoints.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
LSE:SHI Earnings and Revenue Growth October 18th 2024

If you are thinking of buying or selling SIG stock, you should check out this FREE detailed report on its balance sheet.

A Different Perspective

SIG shareholders are down 24% for the year, but the market itself is up 15%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, longer term shareholders are suffering worse, given the loss of 13% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. 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 SIG that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges.