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Positive earnings growth hasn't been enough to get Johnson Controls International (NYSE:JCI) shareholders a favorable return over the last year

·3 min read

Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Investors in Johnson Controls International plc (NYSE:JCI) have tasted that bitter downside in the last year, as the share price dropped 30%. That contrasts poorly with the market decline of 16%. Longer term investors have fared much better, since the share price is up 19% in three years. Shareholders have had an even rougher run lately, with the share price down 25% in the last 90 days. However, one could argue that the price has been influenced by the general market, which is down 13% in the same timeframe.

On a more encouraging note the company has added US$1.1b to its market cap in just the last 7 days, so let's see if we can determine what's driven the one-year loss for shareholders.

View our latest analysis for Johnson Controls International

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).

During the unfortunate twelve months during which the Johnson Controls International share price fell, it actually saw its earnings per share (EPS) improve by 37%. It's quite possible that growth expectations may have been unreasonable in the past.

It's fair to say that the share price does not seem to be reflecting the EPS growth. So it's easy to justify a look at some other metrics.

Johnson Controls International's revenue is actually up 11% over the last year. Since the fundamental metrics don't readily explain the share price drop, there might be an opportunity if the market has overreacted.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
earnings-and-revenue-growth

Johnson Controls International is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

We regret to report that Johnson Controls International shareholders are down 29% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 16%. 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. Longer term investors wouldn't be so upset, since they would have made 5%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should learn about the 3 warning signs we've spotted with Johnson Controls International (including 1 which is potentially serious) .

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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