Yahoo Finance The five-year shareholder returns and company earnings persist lower as ITV (LON:ITV) stock falls a further 4.5% in past week
While not a mind-blowing move, it is good to see that the ITV plc (LON:ITV) share price has gained 18% in the last three months. But that doesn't change the fact that the returns over the last five years have been less than pleasing. After all, the share price is down 50% in that time, significantly under-performing the market.
With the stock having lost 4.5% in the past week, it's worth taking a look at business performance and seeing if there's any red flags.
Check out our latest analysis for ITV
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
During the five years over which the share price declined, ITV's earnings per share (EPS) dropped by 15% each year. Notably, the share price has fallen at 13% per year, fairly close to the change in the EPS. This implies that the market has had a fairly steady view of the stock. Rather, the share price has approximately tracked EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, ITV's TSR for the last 5 years was -39%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
ITV shareholders are down 7.0% for the year (even including dividends), but the market itself is up 3.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. However, the loss over the last year isn't as bad as the 7% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that ITV is showing 3 warning signs in our investment analysis , you should know about...
We will like ITV better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British 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.
