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It hasn't been the best quarter for RedHill Education Limited (ASX:RDH) shareholders, since the share price has fallen 17% in that time. In contrast, the return over three years has been impressive. Indeed, the share price is up a very strong 136% in that time. To some, the recent share price pullback wouldn't be surprising after such a good run. If the business can perform well for years to come, then the recent drop could be an opportunity.
Check out our latest analysis for RedHill Education
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
RedHill Education was able to grow its EPS at 54% per year over three years, sending the share price higher. The average annual share price increase of 33% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how RedHill Education has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at RedHill Education's financial health with this free report on its balance sheet.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for RedHill Education the TSR over the last 3 years was 143%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While the broader market gained around 13% in the last year, RedHill Education shareholders lost 33% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 15% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Is RedHill Education cheap compared to other companies? These 3 valuation measures might help you decide.