International Consolidated Airlines Group (LON:IAG) earnings and shareholder returns have been trending downwards for the last five years, but the stock increases 3.3% this past week
We think intelligent long term investing is the way to go. But along the way some stocks are going to perform badly. Zooming in on an example, the International Consolidated Airlines Group S.A. (LON:IAG) share price dropped 77% in the last half decade. That's not a lot of fun for true believers.
While the last five years has been tough for International Consolidated Airlines Group shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.
View our latest analysis for International Consolidated Airlines Group
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
During five years of share price growth, International Consolidated Airlines 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 might give us a better handle on how its value is changing over time.
Arguably, the revenue drop of 12% 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 how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting that the CEO is paid less than the median at similar sized 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 International Consolidated Airlines Group in this interactive graph of future profit estimates.
What About The Total Shareholder Return (TSR)?
Investors should note that there's a difference between International Consolidated Airlines Group's total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for International Consolidated Airlines Group shareholders, and that cash payout explains why its total shareholder loss of 60%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
It's good to see that International Consolidated Airlines Group has rewarded shareholders with a total shareholder return of 28% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 10% per year over five years. This makes us a little wary, but the business might have turned around its fortunes. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for International Consolidated Airlines Group you should know about.
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 British 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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