The main aim of stock picking is to find the market-beating stocks. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in Nokia Corporation (HEL:NOKIA), since the last five years saw the share price fall 52%. And some of the more recent buyers are probably worried, too, with the stock falling 39% in the last year. Even worse, it's down 34% in about a month, which isn't fun at all. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.
Because Nokia is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Shareholders of unprofitable companies usually expect strong revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
In the last half decade, Nokia saw its revenue increase by 14% per year. That's a fairly respectable growth rate. The share price, meanwhile, has fallen 14% compounded, over five years. That suggests the market is disappointed with the current growth rate. A pessimistic market can create opportunities.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Nokia is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Nokia in this interactive graph of future profit estimates.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. In the case of Nokia, it has a TSR of -44% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Investors in Nokia had a tough year, with a total loss of 38% (including dividends) , against a market gain of about 11%. 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 Buffett 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 businesses. Importantly, we haven't analysed Nokia's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on FI exchanges.
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.
If you spot an error that warrants correction, please contact the editor at email@example.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. Thank you for reading.