Leonardo (BIT:LDO) Shareholders Booked A 56% Gain In The Last Five Years
When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, the Leonardo S.p.a. (BIT:LDO) share price is up 56% in the last 5 years, clearly besting than the market return of around -35% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 12%, including dividends.
See our latest analysis for Leonardo
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.
During the five years of share price growth, Leonardo moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. In fact, the Leonardo stock price is 5.0% lower in the last three years. During the same period, EPS grew by 23% each year. So there seems to be a mismatch between the positive EPS growth and the change in the share price, which is down -1.7% per year.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Leonardo has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Leonardo'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
We're pleased to report that Leonardo shareholders have received a total shareholder return of 12% over one year. And that does include the dividend. That's better than the annualised return of 9.9% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Before deciding if you like the current share price, check how Leonardo scores on these 3 valuation metrics.
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 IT 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 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. Thank you for reading.
