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Did Changing Sentiment Drive VEON's (NASDAQ:VEON) Share Price Down By 40%?

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 main game is to find enough winners to more than offset the losers So we wouldn't blame long term VEON Ltd. (NASDAQ:VEON) shareholders for doubting their decision to hold, with the stock down 40% over a half decade. There was little comfort for shareholders in the last week as the price declined a further 1.9%.

Check out our latest analysis for VEON

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

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During five years of share price growth, VEON moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics might give us a better handle on how its value is changing over time.

We note that the dividend has remained healthy, so that wouldn't really explain the share price drop. It could be that the revenue decline of 7.8% per year is viewed as evidence that VEON is shrinking. With dividends up, but revenue down, some investors might be concluding that the company is no longer growing.

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

NasdaqGS:VEON Income Statement, January 29th 2020
NasdaqGS:VEON Income Statement, January 29th 2020

VEON is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, VEON's TSR for the last 5 years was -23%, 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

VEON shareholders are up 17% for the year (even including dividends) . But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 5.1% endured over half a decade. It could well be that the business is stabilizing. 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 - VEON has 3 warning signs (and 1 which is significant) we think 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 US exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.