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Cavendish Financial (LON:CAV) shareholders are in the red if they invested three years ago
While it’s not a mind-blowing move, it’s nice to see that the Cavendish Financial plc (LON:CAV) the stock price has risen 12% in the last three months. Meanwhile, over the last three years, the stock has fallen a lot. Tragically, the stock price has fallen 68% in that time. So it’s good to see it rising again. After all, the drop may have been overdone.
Since shareholders are bearish over the long term, let’s look at the underlying fundamentals over that time and see if they have been consistent with returns.
Check out our latest analysis for Cavendish Financial
Given that Cavendish Financial has been losing money for the past twelve months, we think the market is probably more focused on revenue and revenue growth, at least for now. Shareholders of unprofitable companies generally want strong revenue growth. This is because it is difficult to be confident that a company will be sustainable if revenue growth is negligible and it never turns a profit.
Over the past three years, Cavendish Financial’s revenue has fallen by 15% per year. This is definitely a weaker result than most pre-earnings companies report. Arguably, the market has responded appropriately to this trading performance, sending the share price down by 19% (annualized) over the same period of time. Bagholders or ‘baggies’ are people who buy more shares as the price drops. They are then left ‘holding the bag’ if the shares turn out to be worthless. It may be a while before the company repays its suffering shareholders with share price gains.
You can see below how profits and revenues have changed over time (discover the exact values by clicking on the image).
earnings-and-revenue-growth
We welcome the fact that insiders have made significant purchases over the past year. However, future earnings will be much more important in determining whether current shareholders make money. This free interactive report on Cavendish Financial’s earnings, revenue and cash flow is a great place to start if you want to investigate the stock further.
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. Therefore, for companies that pay a generous dividend, the TSR is often much higher than the share price return. In the case of Cavendish Financial, it has a TSR of -65% over the past 3 years. This is higher than the share price return we mentioned earlier. The dividends paid by the company have therefore increased the total shareholder return.
The story continues
A Different Perspective
We are pleased to report that Cavendish Financial shareholders have received a total shareholder return of 30% over one year. Of course, this includes the dividend. There is no doubt that these recent returns are much better than the 8% annual TSR loss over five years. We generally give more weight to long-term performance than short-term, but the recent improvement may suggest a (positive) inflection point within the business. It is always interesting to track share price performance over the long term. But to understand Cavendish Financial better, we need to consider many other factors. Take the risk, for example – Cavendish Financial has 5 warning signs (and 2 that are significant) we thought you should know.
If you like buying stocks alongside management, then you might love this free list of companies. (Hint: most of them are going unnoticed).
Please note that the market returns quoted in this article reflect the market weighted average returns of stocks currently traded on UK exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts using only an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or financial situation. Our aim is to bring you long-term focused analysis, driven by fundamental data. Please 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 stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch directly with us. Alternatively, send an email editorial-team@simplywallst.com