U.S. Markets closed
  • S&P Futures

    3,929.25
    +6.50 (+0.17%)
     
  • Dow Futures

    31,497.00
    +57.00 (+0.18%)
     
  • Nasdaq Futures

    11,941.75
    +6.25 (+0.05%)
     
  • Russell 2000 Futures

    1,779.00
    +6.20 (+0.35%)
     
  • Crude Oil

    110.85
    +1.26 (+1.15%)
     
  • Gold

    1,814.60
    -1.30 (-0.07%)
     
  • Silver

    21.47
    -0.07 (-0.34%)
     
  • EUR/USD

    1.0505
    +0.0040 (+0.3782%)
     
  • 10-Yr Bond

    2.8860
    -0.0820 (-2.76%)
     
  • Vix

    30.96
    +4.86 (+18.62%)
     
  • GBP/USD

    1.2376
    +0.0034 (+0.2760%)
     
  • USD/JPY

    128.7670
    +0.4700 (+0.3663%)
     
  • BTC-USD

    29,166.30
    -729.18 (-2.44%)
     
  • CMC Crypto 200

    650.00
    -20.68 (-3.08%)
     
  • FTSE 100

    7,438.09
    -80.26 (-1.07%)
     
  • Nikkei 225

    26,238.40
    -672.80 (-2.50%)
     

General Electric (NYSE:GE) sheds US$6.0b, company earnings and investor returns have been trending downwards for past five years

  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.

Generally speaking long term investing is the way to go. But along the way some stocks are going to perform badly. To wit, the General Electric Company (NYSE:GE) share price managed to fall 64% over five long years. That's not a lot of fun for true believers. More recently, the share price has dropped a further 8.5% in a month. We do note, however, that the broader market is down 4.1% in that period, and this may have weighed on the share price.

After losing 5.7% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

Check out our latest analysis for General Electric

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

General Electric 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.

We don't think that the 0.3% is big factor in the share price, since it's quite small, as dividends go. Arguably, the revenue drop of 9.8% a year for half a decade suggests that the company can't grow in the long term. This has probably encouraged some shareholders to sell down the stock.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

earnings-and-revenue-growth
earnings-and-revenue-growth

It's good to see that there was some significant insider buying in the last three months. That's a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. If you are thinking of buying or selling General Electric stock, you should check out this free report showing analyst profit forecasts.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, General Electric's TSR for the last 5 years was -60%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

General Electric shareholders gained a total return of 6.0% during the year. But that was short of the market average. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 10% endured over half a decade. It could well be that the business is stabilizing. It's always interesting to track share price performance over the longer term. But to understand General Electric better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with General Electric (including 1 which shouldn't be ignored) .

General Electric is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

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.