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If you are building a properly diversified stock portfolio, the chances are some of your picks will perform badly. But the last three years have been particularly tough on longer term Knights Group Holdings plc (LON:KGH) shareholders. Unfortunately, they have held through a 69% decline in the share price in that time. Shareholders have had an even rougher run lately, with the share price down 13% in the last 90 days. We note that the company has reported results fairly recently; and the market is hardly delighted. You can check out the latest numbers in our company report.
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.
View our latest analysis for Knights Group Holdings
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Although the share price is down over three years, Knights Group Holdings actually managed to grow EPS by 40% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.
It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.
We note that, in three years, revenue has actually grown at a 12% annual rate, so that doesn't seem to be a reason to sell shares. This analysis is just perfunctory, but it might be worth researching Knights Group Holdings more closely, as sometimes stocks fall unfairly. This could present an opportunity.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We know that Knights Group Holdings has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Knights Group Holdings, it has a TSR of -65% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!