Whereas plc learning technologies group (LON: LTG) Shareholders are likely generally happy the stock hasn’t had a particularly good run recently, with the stock price falling 21% in the last quarter. But that doesn’t change the fact that returns over the past five years have been very strong. In fact, the stock price increased by 187% during this period. We believe it is more important to focus on long-term returns than on short-term returns. Ultimately, trade performance will determine whether the stock price continues its positive long-term trend. Unfortunately, not all shareholders will have held onto it for the long term, so spare a thought for those caught up in the 31% decline over the past twelve months.
Although the stock has fallen 6.2% this week, it is worth focusing on the long term and seeing if historical stock returns have been driven by underlying fundamentals.
Check out our latest analysis for Learning Technologies Group
It is undeniable that markets are sometimes efficient, but prices do not always reflect the underlying performance of companies. One way to look at how market sentiment has changed over time is to look at the interaction between a company’s stock price and its earnings per share (EPS).
In the five years of share price growth, Learning Technologies Group has gone from loss to profitability. This type of transition can be an inflection point justifying a sharp rise in the stock price, as we have seen here. Since the company was not profitable five years ago, but not three years ago, it is also worth taking a look at the returns of the last three years. Indeed, the Learning Technologies Group share price has gained 39% in three years. Meanwhile, EPS is up 43% annually. This EPS growth is higher than the average annual share price increase of 12% over the same three years. So you might conclude that the market is a bit more cautious about the stock these days. Of course, with a P/E ratio of 64.89, the market remains bullish.
The graph below illustrates the evolution of EPS over time (reveal the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases over the past year. That said, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Before buying or selling a stock, we always recommend a careful review of historical growth trends, available here.
What about dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price performance. TSR is a calculation of return that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of all discounted capital raisings and spinoffs. It’s fair to say that the TSR gives a more complete picture of stocks that pay a dividend. In the case of Learning Technologies Group, it has posted a TSR of 193% over the last 5 years. This exceeds the performance of its share price that we mentioned earlier. And there’s no price guessing that dividend payouts largely explain the divergence!
A different perspective
We regret to report that Learning Technologies Group shareholders are down 31% for the year (even including dividends). Unfortunately, this is worse than the broader market decline of 0.1%. However, it could simply be that the stock price was impacted by greater market jitters. It might be worth keeping an eye on the fundamentals, in case there is a good opportunity. Longer-term investors wouldn’t be so upset, as they would have gained 24%, every year, over five years. It could be that the recent selloff is an opportunity, so it may be worth checking the fundamentals for signs of a long-term growth trend. It is always interesting to follow the evolution of the share price over the long term. But to better understand Learning Technologies Group, we need to consider many other factors. Take for example the ubiquitous specter of investment risk. We have identified 4 warning signs with Learning Technologies Group, and understanding them should be part of your investment process.
Learning Technologies Group isn’t the only stock insiders are buying. So take a look at this free list of growing companies with insider buying.
Please note that the market returns quoted in this article reflect the market-weighted average returns of the shares currently trading on UK stock exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.