U.S. Markets closed

Should Manchester United (NYSE:MANU) Be Disappointed With Their 27% Profit?

Simply Wall St

Investors can buy low cost index fund if they want to receive the average market return. But across the board there are plenty of stocks that underperform the market. For example, the Manchester United plc (NYSE:MANU) share price return of 27% over three years lags the market return in the same period. At least the stock price is up over the last year, albeit only by 0.7%.

See our latest analysis for Manchester United

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

Manchester United became profitable within the last three years. That would generally be considered a positive, so we'd expect the share price to be up.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

NYSE:MANU Past and Future Earnings, February 10th 2020

We know that Manchester United has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Manchester United, it has a TSR of 30% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Manchester United shareholders are up 1.7% for the year (even including dividends) . But that was short of the market average. If we look back over five years, the returns are even better, coming in at 3.3% per year for five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand Manchester United better, we need to consider many other factors. Be aware that Manchester United is showing 2 warning signs in our investment analysis , and 1 of those is concerning...

But note: Manchester United may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.