Shareholders in Jupiter Fund Management (LON:JUP) are in the red if they invested five years ago

Generally speaking long term investing is the way to go. But unfortunately, some companies simply don’t succeed. For example the Jupiter Fund Management Plc (LON:JUP) share price dropped 77% over five years. We certainly feel for shareholders who bought near the top. And it’s not just long term holders hurting, because the stock is down 34% in the last year.

With that in mind, it’s worth seeing if the company’s underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

See our latest analysis for Jupiter Fund Management

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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.

In the last half decade Jupiter Fund Management saw its share price fall as its EPS declined below zero. The recent extraordinary items contributed to this situation. At present it’s hard to make valid comparisons between EPS and the share price. However, we can say we’d expect to see a falling share price in this scenario.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growthearnings-per-share-growth

earnings-per-share-growth

It might be well worthwhile taking a look at our free report on Jupiter Fund Management’s earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Jupiter Fund Management’s TSR for the last 5 years was -68%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Investors in Jupiter Fund Management had a tough year, with a total loss of 30% (including dividends), against a market gain of about 7.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 11% per year over five years. We realise that Baron Rothschild has said investors should “buy when there is blood on the streets”, but we caution that investors should first be sure they are buying a high quality business. It’s always interesting to track share price performance over the longer term. But to understand Jupiter Fund Management better, we need to consider many other factors. Even so, be aware that Jupiter Fund Management is showing 2 warning signs in our investment analysis , you should know about…

If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.

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