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The past three years for Ryman Healthcare (NZSE:RYM) investors has not been profitable

If you love investing in stocks you're bound to buy some losers. But the long term shareholders of Ryman Healthcare Limited (NZSE:RYM) have had an unfortunate run in the last three years. Regrettably, they have had to cope with a 71% drop in the share price over that period. And more recent buyers are having a tough time too, with a drop of 41% in the last year. The falls have accelerated recently, with the share price down 13% in the last three months. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Ryman Healthcare

We don't think that Ryman Healthcare's modest trailing twelve month profit has the market's full attention at the moment. We think revenue is probably a better guide. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.

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In the last three years, Ryman Healthcare saw its revenue grow by 13% per year, compound. That's a fairly respectable growth rate. So it's hard to believe the share price decline of 20% per year is due to the revenue. More likely, the market was spooked by the cost of that revenue. This is exactly why investors need to diversify - even when a loss making company grows revenue, it can fail to deliver for shareholders.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. You can see what analysts are predicting for Ryman Healthcare in this interactive graph of future profit estimates.

What About The Total Shareholder Return (TSR)?

We've already covered Ryman Healthcare's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Ryman Healthcare shareholders, and that cash payout explains why its total shareholder loss of 68%, over the last 3 years, isn't as bad as the share price return.

A Different Perspective

While the broader market lost about 1.1% in the twelve months, Ryman Healthcare shareholders did even worse, losing 41%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Ryman Healthcare better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 3 warning signs for Ryman Healthcare you should know about.

Ryman Healthcare is not the only stock that insiders are buying. For those who like to find lesser know companies this free list of growing companies with recent insider purchasing, could be just the ticket.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using 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 account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in 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 with us directly. Alternatively, email editorial-team@simplywallst.com