Yahoo Finance AMP's(ASX:AMP) Share Price Is Down 80% Over The Past Five Years.
Long term investing works well, but it doesn't always work for each individual stock. It hits us in the gut when we see fellow investors suffer a loss. For example, we sympathize with anyone who was caught holding AMP Limited (ASX:AMP) during the five years that saw its share price drop a whopping 80%. The falls have accelerated recently, with the share price down 26% in the last three months.
See our latest analysis for AMP
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
AMP 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.
It could be that the revenue decline of 11% per year is viewed as evidence that AMP is shrinking. That could explain the weak share price.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
We know that AMP has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for AMP in this interactive graph of future profit estimates.
What about the Total Shareholder Return (TSR)?
We'd be remiss not to mention the difference between AMP's total shareholder return (TSR) and its 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. Dividends have been really beneficial for AMP shareholders, and that cash payout explains why its total shareholder loss of 75%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
While the broader market gained around 41% in the last year, AMP shareholders lost 16%. 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. However, the loss over the last year isn't as bad as the 12% per annum loss investors have suffered over the last half decade. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 2 warning signs we've spotted with AMP (including 1 which is concerning) .
If you are like me, then you will not want to miss this free list of growing companies 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 AU exchanges.
This article by Simply Wall St is general in nature. 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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
