While it may not be enough for some shareholders, we think it is good to see the Liberty Global plc (NASDAQ:LBTY.A) share price up 20% in a single quarter. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. In fact, the share price has declined rather badly, down some 57% in that time. So is the recent increase sufficient to restore confidence in the stock? Not yet. But it could be that the fall was overdone.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
We know that Liberty Global 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 may better explain the share price move.
Arguably, the revenue drop of 12% a year for half a decade suggests that the company can't grow in the long term. That could explain the weak share price.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Liberty Global 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 Liberty Global in this interactive graph of future profit estimates.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Liberty Global'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. Liberty Global hasn't been paying dividends, but its TSR of -51% exceeds its share price return of -57%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
Liberty Global shareholders are down 13% for the year, but the market itself is up 9.9%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 8.6% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. You could get a better understanding of Liberty Global's growth by checking out this more detailed historical graph of earnings, revenue and cash flow.
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.
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. 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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