While shareholders of ITV (LON:ITV) are in the red over the last five years, underlying earnings have actually grown

This week we saw the ITV plc (LON:ITV) share price climb by 11%. But over the last half decade, the stock has not performed well. You would have done a lot better buying an index fund, since the stock has dropped 49% in that half decade.

While the last five years has been tough for ITV shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.

See our latest analysis for ITV

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

While the share price declined over five years, ITV actually managed to increase EPS by an average of 0.6% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.

Based on these numbers, we'd venture that the market may have been over-optimistic about forecast growth, half a decade ago. Looking to other metrics might better explain the share price change.

The most recent dividend was actually lower than it was in the past, so that may have sent the share price lower.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

We know that ITV has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for ITV in this interactive graph of future profit estimates.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, ITV's TSR for the last 5 years was -38%, 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

We're pleased to report that ITV shareholders have received a total shareholder return of 30% over one year. And that does include the dividend. That certainly beats the loss of about 7% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. 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. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for ITV (of which 1 is significant!) you should know about.

But note: ITV may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on British exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.