The truth is that if you invest for long enough, you’re going to end up with some losing stocks. Long term Uniti Group Inc. (NASDAQ:UNIT) shareholders know that all too well, since the share price is down considerably over three years. Sadly for them, the share price is down 72% in that time. The more recent news is of little comfort, with the share price down 55% in a year. Furthermore, it’s down 28% in about a quarter. That’s not much fun for holders.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the three years that the share price fell, Uniti Group’s earnings per share (EPS) dropped by 41% each year. This fall in EPS isn’t far from the rate of share price decline, which was 34% per year. So it seems like sentiment towards the stock hasn’t changed all that much over time. Rather, the share price has approximately tracked EPS growth.
We know that Uniti Group has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Uniti Group’s TSR for the last 3 years was -62%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
The last twelve months weren’t great for Uniti Group shares, which cost holders 51%, including dividends, while the market was up about 3.3%. Of course the long term matters more than the short term, and even great stocks will sometimes have a poor year. The three-year loss of 27% per year isn’t as bad as the last twelve months, suggesting that the company has not been able to convince the market it has solved its problems. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Thank you for reading.