Ideally, your overall portfolio should beat the market average. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn’t blame long term Kennedy-Wilson Holdings, Inc. (NYSE:KW) shareholders for doubting their decision to hold, with the stock down 45% over a half decade. We also note that the stock has performed poorly over the last year, with the share price down 32%. Furthermore, it’s down 32% in about a quarter. That’s not much fun for holders. This could be related to the recent financial results – you can catch up on the most recent data by reading our company report.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 five years of share price growth, Kennedy-Wilson Holdings moved from a loss to profitability. Most would consider that to be a good thing, so it’s counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.
The steady dividend doesn’t really explain why the share price is down. It’s not immediately clear to us why the stock price is down but further research might provide some answers.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Kennedy-Wilson Holdings has grown profits over the years, but the future is more important for shareholders. This free interactive report on Kennedy-Wilson Holdings’s balance sheet strength is a great place to start, if you want to investigate the stock further.
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. We note that for Kennedy-Wilson Holdings the TSR over the last 5 years was -35%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Investors in Kennedy-Wilson Holdings had a tough year, with a total loss of 28% (including dividends) , against a market gain of about 12%. 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. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 8.1% over the last half decade. We realise that Baron Rothschild has said investors should “buy when there is blood on the streets”, but we caution that investors should first be sure they are buying a high quality business. It’s always interesting to track share price performance over the longer term. But to understand Kennedy-Wilson Holdings better, we need to consider many other factors. For example, we’ve discovered 5 warning signs for Kennedy-Wilson Holdings (2 are significant!) that you should be aware of before investing here.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.
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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. Thank you for reading.