Those who invested in Icahn Enterprises (NASDAQ:IEP) three years ago are up 5.5%
Many investors define successful investing as beating the market average over the long term. But if you try your hand at stock picking, your risk returning less than the market. Unfortunately, that's been the case for longer term Icahn Enterprises L.P. (NASDAQ:IEP) shareholders, since the share price is down 31% in the last three years, falling well short of the market return of around 46%.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Icahn Enterprises
Icahn Enterprises isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over three years, Icahn Enterprises grew revenue at 0.3% per year. That's not a very high growth rate considering it doesn't make profits. Indeed, the stock dropped 9% over the last three years. Shareholders will probably be hoping growth picks up soon. But ultimately the key will be whether the company can become profitability.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Icahn Enterprises stock, you should check out this free report showing analyst profit forecasts.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Icahn Enterprises the TSR over the last 3 years was 5.5%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Icahn Enterprises shareholders have received a total shareholder return of 6.1% over one year. And that does include the dividend. Having said that, the five-year TSR of 13% a year, is even better. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. 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. To that end, you should learn about the 2 warning signs we've spotted with Icahn Enterprises (including 1 which makes us a bit uncomfortable) .
Icahn Enterprises is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
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.
