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The truth is that if you invest for long enough, you're going to end up with some losing stocks. Long term Newell Brands Inc. (NASDAQ:NWL) shareholders know that all too well, since the share price is down considerably over three years. Regrettably, they have had to cope with a 73% drop in the share price over that period. The falls have accelerated recently, with the share price down 34% in the last three months. But this could be related to the weak market, which is down 24% in the same period.
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 way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During five years of share price growth, Newell Brands moved from a loss to profitability. 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.
We note that the dividend seems healthy enough, so that probably doesn't explain the share price drop. On the other hand, the uninspired reduction in revenue, at 11% each year, may have shareholders ditching the stock. This could have some investors worried about the longer term growth potential (or lack thereof).
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So we recommend checking out this free report showing consensus forecasts
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Newell Brands, it has a TSR of -69% for the last 3 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 11% in the twelve months, Newell Brands shareholders did even worse, losing 12% (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, longer term shareholders are suffering worse, given the loss of 18% doled out over the last five years. We would want clear information suggesting the company will grow, before taking the view that the share price will stabilize. It's always interesting to track share price performance over the longer term. But to understand Newell Brands better, we need to consider many other factors. Case in point: We've spotted 4 warning signs for Newell Brands you should be aware of, and 1 of them makes us a bit uncomfortable.
Newell Brands is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned.
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