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The main aim of stock picking is to find the market-beating stocks. But even the best stock picker will only win with some selections. So we wouldn't blame long term Citigroup Inc. (NYSE:C) shareholders for doubting their decision to hold, with the stock down 35% over a half decade.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Citigroup
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Citigroup became profitable within the last five years. Most would consider that to be a good thing, so it's counter-intuitive to see the share price declining. Other metrics might give us a better handle on how its value is changing over time.
We note that the dividend has remained healthy, so that wouldn't really explain the share price drop. It's not immediately clear to us why the stock price is down but further research might provide some answers.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Citigroup is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Citigroup in this interactive graph of future profit estimates.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Citigroup, it has a TSR of -23% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Citigroup shareholders are down 5.7% for the year (even including dividends), but the market itself is up 12%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. If you would like to research Citigroup in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.