Imagine Owning IMI (LON:IMI) And Wondering If The 20% Share Price Slide Is Justified
Ideally, your overall portfolio should beat the market average. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term IMI plc (LON:IMI) shareholders for doubting their decision to hold, with the stock down 20% over a half decade. It's down 1.8% in the last seven days.
View our latest analysis for IMI
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Looking back five years, both IMI's share price and EPS declined; the latter at a rate of 1.3% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 4.3% per year, over the period. This implies that the market is more cautious about the business these days.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that IMI has improved its bottom line lately, but is it going to grow revenue? Check if analysts think IMI will grow revenue in the future.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. We note that for IMI the TSR over the last 5 years was -3.6%, 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 IMI shareholders have received a total shareholder return of 17% over the last year. Of course, that includes the dividend. That certainly beats the loss of about 0.7% 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. 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 1 warning sign for IMI that you should be aware of before investing here.
Of course IMI may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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.
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. Thank you for reading.
