Investing in stocks inevitably means buying into some companies that perform poorly. Long term International Consolidated Airlines Group, S.A. (LON:IAG) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 73% drop in the share price over that period. Furthermore, it's down 16% in about a quarter. That's not much fun for holders.
International Consolidated Airlines Group wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
In the last three years International Consolidated Airlines Group saw its revenue shrink by 27% per year. That's definitely a weaker result than most pre-profit companies report. The swift share price decline at an annual compound rate of 20%, reflects this weak fundamental performance. We prefer leave it to clowns to try to catch falling knives, like this stock. There is a good reason that investors often describe buying a sharply falling stock price as 'trying to catch a falling knife'. Think about it.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling International Consolidated Airlines Group stock, you should check out this free report showing analyst profit forecasts.
What about the Total Shareholder Return (TSR)?
We've already covered International Consolidated Airlines Group's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Its history of dividend payouts mean that International Consolidated Airlines Group's TSR, which was a 54% drop over the last 3 years, was not as bad as the share price return.
A Different Perspective
International Consolidated Airlines Group shareholders have received returns of 29% over twelve months, which isn't far from the general market return. To take a positive view, the gain is pleasing, and it sure beats annualized TSR loss of 4%, which was endured over half a decade. While 'turnarounds seldom turn' there are green shoots for International Consolidated Airlines Group. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for International Consolidated Airlines Group you should know about.
International Consolidated Airlines Group is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB 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.
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