Ituran Location and Control Ltd. (NASDAQ:ITRN) shareholders should be happy to see the share price up 12% in the last month. But that doesn’t change the reality of under-performance over the last twelve months. After all, the share price is down 22% in the last year, significantly under-performing the market.
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.
Unhappily, Ituran Location and Control had to report a 44% decline in EPS over the last year. This fall in the EPS is significantly worse than the 22% the share price fall. So the market may not be too worried about the EPS figure, at the moment — or it may have expected earnings to drop faster.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
While the share price will often move with EPS, other factors can also play a role. For example, we’ve discovered 3 warning signs for Ituran Location and Control which any shareholder or potential investor should be aware of.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Ituran Location and Control the TSR over the last year was -20%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While the broader market gained around 27% in the last year, Ituran Location and Control shareholders lost 20% (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. Longer term investors wouldn’t be so upset, since they would have made 7.7%, 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. Before forming an opinion on Ituran Location and Control you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned.
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