iSelect (ASX:ISU shareholders incur further losses as stock declines 10% this week, taking five-year losses to 67%

By
Simply Wall St
Published
August 25, 2021
ASX:ISU
Source: Shutterstock

While it may not be enough for some shareholders, we think it is good to see the iSelect Limited (ASX:ISU) share price up 24% in a single quarter. But that is little comfort to those holding over the last half decade, sitting on a big loss. The share price has failed to impress anyone , down a sizable 70% during that time. So is the recent increase sufficient to restore confidence in the stock? Not yet. We'd err towards caution given the long term under-performance.

After losing 10% this past week, it's worth investigating the company's fundamentals to see what we can infer from past performance.

View our latest analysis for iSelect

Because iSelect made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.

In the last five years iSelect saw its revenue shrink by 11% per year. That puts it in an unattractive cohort, to put it mildly. It seems appropriate, then, that the share price slid about 11% annually during that time. It's fair to say most investors don't like to invest in loss making companies with falling revenue. This looks like a really risky stock to buy, at a glance.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
ASX:ISU Earnings and Revenue Growth August 26th 2021

Take a more thorough look at iSelect's financial health with this free report on its balance sheet.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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, iSelect's TSR for the last 5 years was -67%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's nice to see that iSelect shareholders have received a total shareholder return of 63% over the last year. That's including the dividend. Notably the five-year annualised TSR loss of 11% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - iSelect has 4 warning signs (and 1 which is potentially serious) we think you should know about.

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 AU exchanges.

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