InterDigital's (NASDAQ:IDCC) five-year decline in earnings translates into losses for shareholders

For many, the main point of investing is to generate higher returns than the overall market. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in InterDigital, Inc. (NASDAQ:IDCC), since the last five years saw the share price fall 17%.

On a more encouraging note the company has added US$57m to its market cap in just the last 7 days, so let's see if we can determine what's driven the five-year loss for shareholders.

Check out our latest analysis for InterDigital

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During the five years over which the share price declined, InterDigital's earnings per share (EPS) dropped by 25% each year. The share price decline of 4% per year isn't as bad as the EPS decline. So investors might expect EPS to bounce back -- or they may have previously foreseen the EPS decline.

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

We know that InterDigital has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on InterDigital's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of InterDigital, it has a TSR of -8.5% 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

While it's never nice to take a loss, InterDigital shareholders can take comfort that , including dividends,their trailing twelve month loss of 8.0% wasn't as bad as the market loss of around 15%. Given the total loss of 1.7% per year over five years, it seems returns have deteriorated in the last twelve months. Whilst Baron Rothschild does tell the investor "buy when there's blood in the streets, even if the blood is your own", buyers would need to examine the data carefully to be comfortable that the business itself is sound. 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. Even so, be aware that InterDigital is showing 2 warning signs in our investment analysis , you should know about...

We will like InterDigital better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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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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.