RFG Holdings (JSE:RFG) earnings and shareholder returns have trended down over the past five years, but the stock is up 20% over the past week

RFG Holdings Limited (JSE:RFG) shareholders should be pleased that the stock price is up 20% over the past week. But the stock hasn’t performed well over the past half decade. After all, the share price has fallen by 51% during this time, significantly underperforming the market.

Though last week was more reassuring for shareholders, they’ve still been in the red for the last five years. So let’s see if the underlying business was to blame for the decline.

Check out our latest analysis for RFG Holdings

Freely adapted from Benjamin Graham: In the short term the market is a voting machine, but in the long term it is a scale. An imperfect but simple way to study how a company’s market perception has changed is to compare the change in earnings per share (EPS) to stock price movement.

During the five years that the stock price declined, RFG Holdings’ earnings per share (EPS) declined 5.2% each year. This reduction in EPS is less than the 13% annual reduction in the stock price. So it seems that the market has historically been overly confident about the business. The low P/E ratio of 11.86 further reflects this caution.

The graph below shows how the EPS has changed over time (click on the image to see the exact values).

Earnings per share growth
JSE:RFG earnings growth per share June 1, 2022

We are pleased to report that the CEO is paid more modestly than most CEOs of similarly capitalized companies. But while CEO pay is always worth checking out, the really important question is whether the company can grow profits going forward. Before buying or selling any stock, we always recommend a close study of its historical growth trends, which are available here.

What about dividends?

When looking at investment returns, it’s important to consider the difference between Total shareholder return (TSR) and stock price return. The TSR is a return calculation that takes into account the value of cash dividends (assuming dividends received have been reinvested) and the calculated value of capital increases and spin-offs at a discount. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of RFG Holdings, it has a TSR of -47% over the last 5 years. That exceeds the previously mentioned stock price return. This is mainly due to the dividend payments!

A different perspective

RFG Holdings shareholders are down 8.8% for the year (also including dividends), but the market itself is up 6.1%. Even the share prices of good stocks sometimes fall, but we want to see improvements in a company’s fundamental metrics before we get too interested. Unfortunately, given the 8% loss spread over the past five years, longer-term shareholders suffer even worse. We’d need to see some sustained improvements in key metrics before we could muster much enthusiasm. It is always interesting to follow stock price developments over the longer term. But to better understand RFG Holdings, we need to consider many other factors. Note, however, that RFG Holdings makes an appearance 2 warning signs in our investment analysis and 1 of them should not be ignored…

For those who like to find win investments This free List of growing companies with recent insider purchases might be just the ticket.

Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on the ZA exchanges.

This Simply Wall St article is of a general nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended as financial advice. It is not a recommendation to buy or sell any stock and does not take into account your goals or financial situation. Our goal is to offer you long-term focused analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned.

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