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Did Changing Sentiment Drive Myer Holdings's (ASX:MYR) Share Price Down A Worrying 67%?

Statistically speaking, long term investing is a profitable endeavour. But unfortunately, some companies simply don't succeed. For example the Myer Holdings Limited (ASX:MYR) share price dropped 67% over five years. That is extremely sub-optimal, to say the least. Furthermore, it's down 16% in about a quarter. That's not much fun for holders.

Check out our latest analysis for Myer 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.

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Myer Holdings became profitable within the last five years. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.

The revenue decline of 2.3% isn't too bad. But if the market expected durable top line growth, then that could explain the share price weakness.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

ASX:MYR Income Statement, January 14th 2020
ASX:MYR Income Statement, January 14th 2020

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on Myer Holdings

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Myer Holdings's total shareholder return (TSR) and its share price change, which we've covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Its history of dividend payouts mean that Myer Holdings's TSR, which was a 59% drop over the last 5 years, was not as bad as the share price return.

A Different Perspective

Myer Holdings's TSR for the year was broadly in line with the market average, at 27%. The silver lining is that the share price is up in the short term, which flies in the face of the annualised loss of 16% over the last five years. We're pretty skeptical of turnaround stories, but it's good to see the recent share price recovery. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 1 warning sign for Myer Holdings that you should be aware of before investing here.

Myer Holdings is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.