It hasn't been the best quarter for News Corporation (NASDAQ:NWSA) shareholders, since the share price has fallen 20% in that time. In contrast the stock has done reasonably well over three years. In fact the stock is up 43%, which is better than the market return of 41%.
In light of the stock dropping 4.8% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
News became profitable within the last three years. So we would expect a higher share price over the period.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that News has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on News' balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of News, it has a TSR of 48% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
We regret to report that News shareholders are down 36% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 14%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. 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 News better, we need to consider many other factors. For example, we've discovered 1 warning sign for News that you should be aware of before investing here.
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 US 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.