Investing in ZIM Integrated Shipping Services (NYSE:ZIM) three years ago would have delivered you a 13% gain

While it may not be enough for some shareholders, we think it is good to see the ZIM Integrated Shipping Services Ltd. (NYSE:ZIM) share price up 20% in a single quarter. But that doesn't change the fact that the returns over the last three years have been less than pleasing. Truth be told the share price declined 60% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.

It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.

See our latest analysis for ZIM Integrated Shipping Services

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 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.

ZIM Integrated Shipping Services became profitable within the last five years. We would usually expect to see the share price rise as a result. So it's worth looking at other metrics to try to understand the share price move.

It's quite likely that the declining dividend has caused some investors to sell their shares, pushing the price lower in the process. The revenue decline, at an annual rate of 25% over three years, might be considered salt in the wound.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

We know that ZIM Integrated Shipping Services has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think ZIM Integrated Shipping Services will earn in the future (free profit forecasts).

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of ZIM Integrated Shipping Services, it has a TSR of 13% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that ZIM Integrated Shipping Services rewarded shareholders with a total shareholder return of 96% over the last year. And yes, that does include the dividend. So this year's TSR was actually better than the three-year TSR (annualized) of 4%. The improving returns to shareholders suggests the stock is becoming more popular with time. 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 for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with ZIM Integrated Shipping Services (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.