EML Payments (ASX:EML) adds AU$33m to market cap in the past 7 days, though investors from five years ago are still down 79%

This week we saw the EML Payments Limited (ASX:EML) share price climb by 10%. But spare a thought for the long term holders, who have held the stock as it bled value over the last five years. Like a ship taking on water, the share price has sunk 79% in that time. It's true that the recent bounce could signal the company is turning over a new leaf, but we are not so sure. The fundamental business performance will ultimately determine if the turnaround can be sustained.

While the last five years has been tough for EML Payments shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

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EML Payments wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually desire strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last half decade, EML Payments saw its revenue increase by 7.0% per year. That's a fairly respectable growth rate. So it is unexpected to see the stock down 12% per year in the last five years. The market can be a harsh master when your company is losing money and revenue growth disappoints.

The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).

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. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

We're pleased to report that EML Payments shareholders have received a total shareholder return of 13% over one year. That certainly beats the loss of about 12% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

EML Payments 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 Australian exchanges.

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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.