Prudential Financial (NYSE:PRU) pulls back 8.5% this week, but still delivers shareholders stellar 26% CAGR over 3 years
It might be of some concern to shareholders to see the Prudential Financial, Inc. (NYSE:PRU) share price down 13% in the last month. But over three years, the returns would have left most investors smiling After all, the share price is up a market-beating 71% in that time.
In light of the stock dropping 8.5% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.
Check out our latest analysis for Prudential Financial
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Over the last three years, Prudential Financial failed to grow earnings per share, which fell 0.7% (annualized).
Given the share price resilience, we don't think the (declining) EPS numbers are a good measure of how the business is moving forward, right now. So other metrics may hold the key to understanding what is influencing investors.
Interestingly, the dividend has increased over time; so that may have given the share price a boost. Sometimes yield-chasing investors will flock to a company if they think the dividend can grow over time.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Prudential Financial is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Prudential Financial will earn in the future (free analyst consensus estimates)
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Prudential Financial's TSR for the last 3 years was 100%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We regret to report that Prudential Financial shareholders are down 10% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 6.6%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 1.2%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand Prudential Financial better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Prudential Financial you should be aware of.
We will like Prudential Financial better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.
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