The main aim of stock picking is to find the market-beating stocks. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Genworth Financial, Inc. (NYSE:GNW), since the last five years saw the share price fall 47%. But it's up 6.9% in the last week.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Genworth Financial became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.
The revenue decline of 1.1% isn't too bad. But it's quite possible the market had expected better; a closer look at the revenue trends might explain the pessimism.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that Genworth Financial has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Genworth Financial stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Investors in Genworth Financial had a tough year, with a total loss of 2.3%, against a market gain of about 21%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 12% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. Before forming an opinion on Genworth Financial you might want to consider these 3 valuation metrics.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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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