Leonardo's (BIT:LDO) Stock Price Has Reduced 38% In The Past Five Years

By
Simply Wall St
Published
March 29, 2021
BIT:LDO

Leonardo S.p.a. (BIT:LDO) shareholders should be happy to see the share price up 15% in the last quarter. But if you look at the last five years the returns have not been good. In fact, the share price is down 38%, which falls well short of the return you could get by buying an index fund.

View our latest analysis for Leonardo

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).

During the unfortunate half decade during which the share price slipped, Leonardo actually saw its earnings per share (EPS) improve by 1.0% 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. Having said that, we might get a better idea of what's going on with the stock by looking at other metrics.

In contrast to the share price, revenue has actually increased by 2.3% a year in the five year period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.

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

earnings-and-revenue-growth
BIT:LDO Earnings and Revenue Growth March 29th 2021

Leonardo is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between Leonardo's total shareholder return (TSR) and its share price return. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Leonardo shareholders, and that cash payout explains why its total shareholder loss of 34%, over the last 5 years, isn't as bad as the share price return.

A Different Perspective

Leonardo shareholders are up 15% for the year. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 6% endured over half a decade. So this might be a sign the business has turned its fortunes around. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Leonardo (of which 1 is a bit concerning!) 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 IT exchanges.

Promoted
If you’re looking to trade Leonardo, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account.


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.
*Interactive Brokers Rated Lowest Cost Broker by StockBrokers.com Annual Online Review 2020


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

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.


Simply Wall St character - Warren

Simply Wall St

Simply Wall St is a financial technology startup focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of equity analysts with a public, market-beating track record. Learn more about the team behind Simply Wall St.