While it may not be enough for some shareholders, we think it is good to see the MPH Health Care AG (FRA:93M1) share price up 12% in a single quarter. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. In fact, the share price has declined rather badly, down some 70% in that time. Some might say the recent bounce is to be expected after such a bad drop. However, in the best case scenario (far from fait accompli), this improved performance might be sustained.
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
Check out our latest analysis for MPH Health Care
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
MPH Health Care became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.
It could be that the revenue decline of 35% per year is viewed as evidence that MPH Health Care is shrinking. That could explain the weak share price.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
It is of course excellent to see how MPH Health Care has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling MPH Health Care stock, you should check out this FREE detailed report on its balance sheet.
What About The Total Shareholder Return (TSR)?
Investors should note that there's a difference between MPH Health Care's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that MPH Health Care's TSR, which was a 67% drop over the last 5 years, was not as bad as the share price return.
A Different Perspective
MPH Health Care shareholders are down 8.8% for the year, but the market itself is up 5.5%. 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. However, the loss over the last year isn't as bad as the 11% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. 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. Even so, be aware that MPH Health Care is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...