Yahoo Finance Direct Line Insurance Group (LON:DLG) Long Term Shareholders are 12% In The Black
These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But if you pick the right individual stocks, you could make more -- or less -- than that. The Direct Line Insurance Group plc (LON:DLG) stock price is down 26% over five years, but the total shareholder return is 12% once you include the dividend. And that total return actually beats the market decline of 7.7%. The falls have accelerated recently, with the share price down 23% in the last three months. But this could be related to the weak market, which is down 20% in the same period.
Check out our latest analysis for Direct Line Insurance Group
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
While the share price declined over five years, Direct Line Insurance Group actually managed to increase EPS by an average of 2.4% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.
By glancing at these numbers, we'd posit that the the market had expectations of much higher growth, five years ago. Having said that, we might get a better idea of what's going on with the stock by looking at other metrics.
Revenue is actually up 0.9% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
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
What about the Total Shareholder Return (TSR)?
We've already covered Direct Line Insurance Group'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. Dividends have been really beneficial for Direct Line Insurance Group shareholders, and that cash payout contributed to why its TSR of 12%, over the last 5 years, is better than the share price return.
A Different Perspective
We regret to report that Direct Line Insurance Group shareholders are down 15% for the year. Unfortunately, that's worse than the broader market decline of 12%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 2.2% 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. It's always interesting to track share price performance over the longer term. But to understand Direct Line Insurance Group better, we need to consider many other factors. For example, we've discovered 1 warning sign for Direct Line Insurance Group that you should be aware of before investing here.
Direct Line Insurance Group is not the only stock that insiders are buying. For those who like to find winning investments 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 GB exchanges.
Love or hate this article? Concerned about the content? Get in touch with us directly. Alternatively, email 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. 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. Thank you for reading.
