Earnings are growing at Lazard (NYSE:LAZ) but shareholders still don't like its prospects
Ideally, your overall portfolio should beat the market average. But in any portfolio, there will be mixed results between individual stocks. At this point some shareholders may be questioning their investment in Lazard Ltd (NYSE:LAZ), since the last five years saw the share price fall 31%. And the share price decline continued over the last week, dropping some 5.9%. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.
With the stock having lost 5.9% 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 Lazard
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 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.
During the unfortunate half decade during which the share price slipped, Lazard actually saw its earnings per share (EPS) improve by 15% per year. So it doesn't seem like EPS is a great guide to understanding how the market is valuing the stock. Or possibly, the market was previously very optimistic, so the stock has disappointed, despite improving EPS.
Due to the lack of correlation between the EPS growth and the falling share price, it's worth taking a look at other metrics to try to understand the share price movement.
The most recent dividend was actually lower than it was in the past, so that may have sent the share price lower.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
If you are thinking of buying or selling Lazard stock, you should check out this FREE detailed report on its balance sheet.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Lazard's TSR for the last 5 years was -13%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While it's certainly disappointing to see that Lazard shares lost 2.2% throughout the year, that wasn't as bad as the market loss of 9.3%. What is more upsetting is the 2% per annum loss investors have suffered over the last half decade. This sort of share price action isn't particularly encouraging, but at least the losses are slowing. 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. To that end, you should be aware of the 2 warning signs we've spotted with Lazard .
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.
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.
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