Reflecting on Genworth Mortgage Insurance Australia’s (ASX:GMA) Share Price Returns Over The Last Year

Investing in stocks comes with the risk that the share price will fall. Anyone who held Genworth Mortgage Insurance Australia Limited (ASX:GMA) over the last year knows what a loser feels like. The share price is down a hefty 54% in that time. Even if you look out three years, […]

Investing in stocks comes with the risk that the share price will fall. Anyone who held Genworth Mortgage Insurance Australia Limited (ASX:GMA) over the last year knows what a loser feels like. The share price is down a hefty 54% in that time. Even if you look out three years, the returns are still disappointing, with the share price down46% in that time. Furthermore, it’s down 20% in about a quarter. That’s not much fun for holders.

Check out our latest analysis for Genworth Mortgage Insurance Australia

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

During the last year Genworth Mortgage Insurance Australia saw its earnings per share drop below zero. Buyers no doubt think it’s a temporary situation, but those with a nose for quality have low tolerance for losses. We hope for shareholders’ sake that the company becomes profitable again soon.

The company’s earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth

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 interactive report on Genworth Mortgage Insurance Australia’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What about the Total Shareholder Return (TSR)?

We’ve already covered Genworth Mortgage Insurance Australia’s share price action, but we should also mention its total shareholder return (TSR). 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. Genworth Mortgage Insurance Australia’s TSR of was a loss of 50% for the year. That wasn’t as bad as its share price return, because it has paid dividends.

A Different Perspective

We regret to report that Genworth Mortgage Insurance Australia shareholders are down 50% for the year. Unfortunately, that’s worse than the broader market decline of 3.0%. 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. On the bright side, long term shareholders have made money, with a gain of 0.4% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Take risks, for example – Genworth Mortgage Insurance Australia has 1 warning sign we think you should be aware of.

Genworth Mortgage Insurance Australia 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.

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. 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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