The five-year loss for CoreCivic (NYSE:CXW) shareholders likely driven by its shrinking earnings
The main aim of stock picking is to find the market-beating stocks. But in any portfolio, there will be mixed results between individual stocks. So we wouldn't blame long term CoreCivic, Inc. (NYSE:CXW) shareholders for doubting their decision to hold, with the stock down 57% over a half decade. We also note that the stock has performed poorly over the last year, with the share price down 29%. But it's up 9.8% in the last week.
The recent uptick of 9.8% could be a positive sign of things to come, so let's take a look at historical fundamentals.
Check out our latest analysis for CoreCivic
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During the five years over which the share price declined, CoreCivic's earnings per share (EPS) dropped by 6.2% each year. This reduction in EPS is less than the 16% annual reduction in the share price. This implies that the market was previously too optimistic about the stock. The low P/E ratio of 9.05 further reflects this reticence.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that CoreCivic has improved its bottom line lately, but is it going to grow revenue? Check if analysts think CoreCivic will grow revenue in the future.
What About The Total Shareholder Return (TSR)?
We've already covered CoreCivic's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that CoreCivic's TSR, which was a 48% drop over the last 5 years, was not as bad as the share price return.
A Different Perspective
While the broader market gained around 3.1% in the last year, CoreCivic shareholders lost 29%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 8% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that CoreCivic is showing 3 warning signs in our investment analysis , and 2 of those shouldn't be ignored...
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 American 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.
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