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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 So we wouldn’t blame long term News Corporation (NASDAQ:NWSA) shareholders for doubting their decision to hold, with the stock down 27% over a half decade. And it’s not just long term holders hurting, because the stock is down 22% in the last year. There was little comfort for shareholders in the last week as the price declined a further 3.4%.
View our latest analysis for News
News isn’t a profitable company, so it is unlikely we’ll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Over five years, News grew its revenue at 1.0% per year. That’s far from impressive given all the money it is losing. Given this fairly low revenue growth (and lack of profits), it’s not particularly surprising to see the stock down 6.0% (annualized) in the same time frame. The key question is whether the company can make it to profitability, and beyond, without trouble. It could be worth putting it on your watchlist and revisiting when it makes its maiden profit.
Depicted in the graphic below, you’ll see revenue and earnings over time. If you want more detail, you can click on the chart itself.
News is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling News stock, you should check out this free report showing analyst consensus estimates for future profits.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of News, it has a TSR of -22% for the last 5 years. 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
While the broader market lost about 0.4% in the twelve months, News shareholders did even worse, losing 21% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Unfortunately, last year’s performance may indicate unresolved challenges, given that it was worse than the annualised loss of 5.0% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. You could get a better understanding of News’s growth by checking out this more detailed historical graph of earnings, revenue and cash flow.