Informa (LON:INF) shareholders have endured a 33% loss from investing in the stock three years ago

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Informa plc (LON:INF) shareholders have had that experience, with the share price dropping 34% in three years, versus a market decline of about 5.9%. Furthermore, it's down 10% in about a quarter. That's not much fun for holders. But this could be related to the weak market, which is down 5.4% in the same period.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

Check out our latest analysis for Informa

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.

Informa 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. So given the share price is down it's worth checking some other metrics too.

We think that the revenue decline over three years, at a rate of 20% per year, probably had some shareholders looking to sell. After all, if revenue keeps shrinking, it may be difficult to find earnings growth in the future.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Informa is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Informa in this interactive graph of future profit estimates.

A Different Perspective

It's good to see that Informa has rewarded shareholders with a total shareholder return of 8.5% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 2% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Informa , and understanding them should be part of your investment process.

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 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.