What Are The Total Returns Earned By Shareholders Of Johnson Controls International (NYSE:JCI) On Their Investment?

It is doubtless a positive to see that the Johnson Controls International plc (NYSE:JCI) share price has gained some 34% in the last three months. But if you look at the last five years the returns have not been good. After all, the share price is down 19% in that time, significantly under-performing the market.

View our latest analysis for Johnson Controls International

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Looking back five years, both Johnson Controls International’s share price and EPS declined; the latter at a rate of 17% per year. The share price decline of 4.1% per year isn’t as bad as the EPS decline. The relatively muted share price reaction might be because the market expects the business to turn around.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
NYSE:JCI Earnings Per Share Growth August 3rd 2020

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Dive deeper into the earnings by checking this interactive graph of Johnson Controls International’s earnings, revenue and cash flow.

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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Johnson Controls International, it has a TSR of 4.2% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Investors in Johnson Controls International had a tough year, with a total loss of 4.4% (including dividends), against a market gain of about 17%. 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. On the bright side, long term shareholders have made money, with a gain of 0.8% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. 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. Consider for instance, the ever-present spectre of investment risk. We’ve identified 4 warning signs with Johnson Controls International (at least 1 which shouldn’t be ignored) , and understanding them should be part of your investment process.

Johnson Controls International is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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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