Flight Centre Travel Group (ASX:FLT) sheds AU$206m, company earnings and investor returns have been trending downwards for past five years
Generally speaking long term investing is the way to go. But that doesn't mean long term investors can avoid big losses. For example, after five long years the Flight Centre Travel Group Limited (ASX:FLT) share price is a whole 64% lower. That is extremely sub-optimal, to say the least. Unfortunately the share price momentum is still quite negative, with prices down 11% in thirty days. We do note, however, that the broader market is down 4.6% in that period, and this may have weighed on the share price.
If the past week is anything to go by, investor sentiment for Flight Centre Travel Group isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
See our latest analysis for Flight Centre Travel Group
There is no denying that markets are sometimes efficient, but prices do not always reflect 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 five years of share price growth, Flight Centre Travel Group moved from a loss to profitability. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics may better explain the share price move.
We don't think that the 1.0% is big factor in the share price, since it's quite small, as dividends go. Arguably, the revenue drop of 23% a year for half a decade suggests that the company can't grow in the long term. That could explain the weak share price.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. You can see what analysts are predicting for Flight Centre Travel Group in this interactive graph of future profit estimates.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Flight Centre Travel Group, it has a TSR of -56% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We're pleased to report that Flight Centre Travel Group shareholders have received a total shareholder return of 30% over one year. Of course, that includes the dividend. There's no doubt those recent returns are much better than the TSR loss of 9% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. 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. For example, we've discovered 2 warning signs for Flight Centre Travel Group that you should be aware of before investing here.
We will like Flight Centre Travel Group better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian 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.
