Ideally, your overall portfolio should beat the market average. But in any portfolio, there will be mixed results between individual stocks. So we wouldn't blame long term Qantas Airways Limited (ASX:QAN) shareholders for doubting their decision to hold, with the stock down 22% over a half decade. Unfortunately the share price momentum is still quite negative, with prices down 18% in thirty days. We do note, however, that the broader market is down 9.7% in that period, and this may have weighed on the share price.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
Given that Qantas Airways didn't make a profit in the last twelve months, we'll focus on revenue growth to form a quick view of its business development. When a company doesn't make profits, we'd generally expect to see good revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last five years Qantas Airways saw its revenue shrink by 16% per year. That puts it in an unattractive cohort, to put it mildly. On the face of it we'd posit the share price fall of 4% compound, over five years is well justified by the fundamental deterioration. We doubt many shareholders are delighted with this share price performance. It is possible for businesses to bounce back but as Buffett says, 'turnarounds seldom turn'.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Qantas Airways 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 Qantas Airways will earn in the future (free analyst consensus estimates)
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Qantas Airways' total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Qantas Airways' TSR, which was a 15% drop over the last 5 years, was not as bad as the share price return.
A Different Perspective
While it's certainly disappointing to see that Qantas Airways shares lost 5.9% throughout the year, that wasn't as bad as the market loss of 7.0%. Unfortunately, last year's performance may indicate unresolved challenges, given that it's worse than the annualised loss of 3% over the last half decade. While some investors do well specializing in buying companies that are struggling (but nonetheless undervalued), don't forget that Buffett said that 'turnarounds seldom turn'. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We've spotted 2 warning signs for Qantas Airways you should be aware of, and 1 of them is a bit concerning.
Of course Qantas Airways may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.