U.S. Markets closed

Did Changing Sentiment Drive Johnson Controls International's (NYSE:JCI) Share Price Down By 22%?

Simply Wall St

Want to participate in a research study? Help shape the future of investing tools and earn a $60 gift card!

While it may not be enough for some shareholders, we think it is good to see the Johnson Controls International plc (NYSE:JCI) share price up 25% in a single quarter. But over the last half decade, the stock has not performed well. In fact, the share price is down 22%, which falls well short of the return you could get by buying an index fund.

Check out our latest analysis for Johnson Controls International

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

While the share price declined over five years, Johnson Controls International actually managed to increase EPS by an average of 8.2% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Alternatively, growth expectations may have been unreasonable in the past. Generally speaking we'd expect to see stronger share price increases on the back of sustained EPS growth, but other metrics may hold a clue to why the share price performance is relatively modest.

It could be that the revenue decline of 7.9% per year is viewed as evidence that Johnson Controls International is shrinking. This has probably encouraged some shareholders to sell down the stock.

Depicted in the graphic below, you'll see revenue and earnings over time. If you want more detail, you can click on the chart itself.

NYSE:JCI Income Statement, March 30th 2019

Johnson Controls International is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think Johnson Controls International will earn in the future (free analyst 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Johnson Controls International the TSR over the last 5 years was -1.6%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Johnson Controls International provided a TSR of 8.0% over the year (including dividends). That's fairly close to the broader market return. The silver lining is that the share price is up in the short term, which flies in the face of the annualised loss of 0.3% over the last five years. We're pretty skeptical of turnaround stories, but it's good to see the recent share price recovery. If you would like to research Johnson Controls International in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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 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. Thank you for reading.