Millicom International Cellular (NASDAQ:TIGO shareholders incur further losses as stock declines 5.5% this week, taking five-year losses to 74%
Some stocks are best avoided. We really hate to see fellow investors lose their hard-earned money. Spare a thought for those who held Millicom International Cellular S.A. (NASDAQ:TIGO) for five whole years - as the share price tanked 82%. We also note that the stock has performed poorly over the last year, with the share price down 65%. More recently, the share price has dropped a further 18% in a month. But this could be related to poor market conditions -- stocks are down 8.0% in the same time. We really hope anyone holding through that price crash has a diversified portfolio. Even when you lose money, you don't have to lose the lesson.
If the past week is anything to go by, investor sentiment for Millicom International Cellular isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
Check out our latest analysis for Millicom International Cellular
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, Millicom International Cellular 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.
Revenue is actually up 3.9% over the time period. So it seems one might have to take closer look at the fundamentals to understand why the share price languishes. After all, there may be an opportunity.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Millicom International Cellular is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So we recommend checking out this free report showing consensus forecasts
What About The Total Shareholder Return (TSR)?
Investors should note that there's a difference between Millicom International Cellular's total shareholder return (TSR) and its share price change, which we've covered above. 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. Millicom International Cellular's TSR of was a loss of 74% for the 5 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
While the broader market lost about 16% in the twelve months, Millicom International Cellular shareholders did even worse, losing 55%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 12% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. Even so, be aware that Millicom International Cellular is showing 3 warning signs in our investment analysis , and 2 of those don't sit too well with us...
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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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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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