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The three-year decline in earnings for JTC LON:JTC) isn't encouraging, but shareholders are still up 102% over that period

JTC PLC (LON:JTC) shareholders might be concerned after seeing the share price drop 10% in the last month. But that doesn't change the fact that the returns over the last three years have been pleasing. In the last three years the share price is up, 95%: better than the market.

While the stock has fallen 7.1% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.

See our latest analysis for JTC

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over the last three years, JTC failed to grow earnings per share, which fell 17% (annualized).

This means it's unlikely the market is judging the company based on earnings growth. Given this situation, it makes sense to look at other metrics too.

The modest 1.2% dividend yield is unlikely to be propping up the share price. It may well be that JTC revenue growth rate of 22% over three years has convinced shareholders to believe in a brighter future. If the company is being managed for the long term good, today's shareholders might be right to hold on.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

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

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling JTC stock, you should check out this free report showing analyst profit forecasts.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for JTC the TSR over the last 3 years was 102%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

While it's never nice to take a loss, JTC shareholders can take comfort that , including dividends, their trailing twelve month loss of 6.5% wasn't as bad as the market loss of around -11%. Longer term investors wouldn't be so upset, since they would have made 26%, each year, over three years. It's possible that the recent share price decline has more to do with the negative broader market returns than any company specific development. 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. To that end, you should be aware of the 3 warning signs we've spotted with JTC .

JTC is not the only stock that insiders are buying. For those who like to find winning investments 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 GB 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.

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