It is a pleasure to report that the International Game Technology PLC (NYSE:IGT) is up 36% in the last quarter. But that cannot eclipse the less-than-impressive returns over the last three years. In fact, the share price is down 47% in the last three years, falling well short of the market return.
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...' 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).
We know that International Game Technology has been profitable in the past. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. Other metrics might give us a better handle on how its value is changing over time.
Given the healthiness of the dividend payments, we doubt that they've concerned the market. Revenue has been pretty flat over three years, so that isn't an obvious reason shareholders would sell. A closer look at revenue and profit trends might yield insights.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
International Game Technology is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for International Game Technology in this interactive graph of future profit estimates.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of International Game Technology, it has a TSR of -40% for the last 3 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
Over the last year International Game Technology shareholders have received a TSR of 6.8%. Unfortunately this falls short of the market return of around 15%. The silver lining is that the recent rise is far preferable to the annual loss of 16% that shareholders have suffered over the last three years. We hope the turnaround in fortunes continues. Importantly, we haven't analysed International Game Technology's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.
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 US exchanges.
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