Investing in stocks inevitably means buying into some companies that perform poorly. But the last three years have been particularly tough on longer term Newell Brands Inc. (NASDAQ:NWL) shareholders. So they might be feeling emotional about the 68% share price collapse, in that time. The falls have accelerated recently, with the share price down 11% in the last three months.
Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.
There is no denying that markets are sometimes efficient, but prices do not always reflect 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.
Newell Brands has made a profit in the past. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics might give us a better handle on how its value is changing over time.
It's quite likely that the declining dividend has caused some investors to sell their shares, pushing the price lower in the process. The revenue decline, at an annual rate of 13% over three years, might be considered salt in the wound.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Newell Brands is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Newell Brands stock, you should check out this free report showing analyst consensus estimates for future profits.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Newell Brands, it has a TSR of -64% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While the broader market gained around 12% in the last year, Newell Brands shareholders lost 11% (even including dividends). 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. However, the loss over the last year isn't as bad as the 9% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Newell Brands better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Newell Brands you should know about.
For those who like to find winning investments this free list of undervalued 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 American 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.