Ideally, your overall portfolio should beat the market average. But every investor is virtually certain to have both over-performing and under-performing stocks. At this point some shareholders may be questioning their investment in IGM Financial Inc. (TSE:IGM), since the last five years saw the share price fall 27%. Contrary to the longer term story, the last month has been good for stockholders, with a share price gain of 8.7%.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the five years over which the share price declined, IGM Financial's earnings per share (EPS) dropped by 0.2% each year. This reduction in EPS is less than the 6.0% annual reduction in the share price. This implies that the market is more cautious about the business these days.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that IGM Financial has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for IGM Financial the TSR over the last 5 years was -1.9%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that IGM Financial shareholders have received a total shareholder return of 14% over the last year. That's including the dividend. That certainly beats the loss of about 0.4% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. Before forming an opinion on IGM Financial you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CA exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.