Fidelity National Financial (NYSE:FNF) investors are sitting on a loss of 9.3% if they invested a year ago

By
Simply Wall St
Published
May 17, 2022
NYSE:FNF
Source: Shutterstock

Most people feel a little frustrated if a stock they own goes down in price. But sometimes a share price fall can have more to do with market conditions than the performance of the specific business. So while the Fidelity National Financial, Inc. (NYSE:FNF) share price is down 12% in the last year, the total return to shareholders (which includes dividends) was -9.3%. That's better than the market which declined 9.4% over the last year. The silver lining (for longer term investors) is that the stock is still 3.7% higher than it was three years ago. In the last ninety days we've seen the share price slide 16%. Of course, this share price action may well have been influenced by the 13% decline in the broader market, throughout the period.

Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.

Check out our latest analysis for Fidelity National Financial

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 twelve months during which the Fidelity National Financial share price fell, it actually saw its earnings per share (EPS) improve by 6.5%. It's quite possible that growth expectations may have been unreasonable in the past.

It's surprising to see the share price fall so much, despite the improved EPS. So it's well worth checking out some other metrics, too.

We don't see any weakness in the Fidelity National Financial's dividend so the steady payout can't really explain the share price drop. The revenue trend doesn't seem to explain why the share price is down. Unless, of course, the market was expecting a revenue uptick.

The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).

earnings-and-revenue-growth
NYSE:FNF Earnings and Revenue Growth May 17th 2022

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. If you are thinking of buying or selling Fidelity National Financial stock, you should check out this free report showing analyst profit forecasts.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Fidelity National Financial, it has a TSR of -9.3% for the last 1 year. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

The total return of 9.3% received by Fidelity National Financial shareholders over the last year isn't far from the market return of -9.4%. Longer term investors wouldn't be so upset, since they would have made 10%, each year, over five years. If the fundamental data remains strong, and the share price is simply down on sentiment, then this could be an opportunity worth investigating. It's always interesting to track share price performance over the longer term. But to understand Fidelity National Financial better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Fidelity National Financial you should be aware of, and 1 of them makes us a bit uncomfortable.

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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