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What Type Of Returns Would Loews'(NYSE:L) Shareholders Have Earned If They Purchased Their SharesYear Ago?

Simply Wall St

Investors can approximate the average market return by buying an index fund. Active investors aim to buy stocks that vastly outperform the market - but in the process, they risk under-performance. Investors in Loews Corporation (NYSE:L) have tasted that bitter downside in the last year, as the share price dropped 32%. That falls noticeably short of the market return of around 9.9%. Looking at the longer term, the stock is down 26% over three years.

Check out our latest analysis for Loews

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.

During the last year Loews saw its earnings per share drop below zero. While this may prove temporary, we'd consider it a negative, so it doesn't surprise us that the stock price is down. We hope for shareholders' sake that the company becomes profitable again soon.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
earnings-per-share-growth

This free interactive report on Loews' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Loews' total shareholder return (TSR) and its share price change, which we've covered above. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Loews shareholders, and that cash payout explains why its total shareholder loss of 32%, over the last year, isn't as bad as the share price return.

A Different Perspective

Loews shareholders are down 32% for the year (even including dividends), 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 0.2% per year over five years. 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. It's always interesting to track share price performance over the longer term. But to understand Loews better, we need to consider many other factors. Even so, be aware that Loews is showing 1 warning sign in our investment analysis , you should know about...

Of course Loews may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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.

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