Investors in GTN (ASX:GTN) have sadly lost 83% over the past five years

Some stocks are best avoided. We don’t wish anyone a catastrophic capital loss. For example, we sympathize with anyone who has been caught GTN limited (ASX: GTN) in the five years that saw its share price drop 86%. Moreover, it fell by 17% in about a quarter. It’s not much fun for the holders. This could be related to recent financial results – you can keep up to date with the latest data by reading our corporate report. We really hope that anyone weathering this price drop has a diversified portfolio. Even when you lose money, you don’t have to lose the lesson.

Now let’s look at the fundamentals of the business and see if the long-term shareholder return matches the performance of the underlying business.

See our latest analysis for GTN

To quote Buffett, “Ships will circumnavigate the globe, but the Flat Earth Society will prosper. There will continue to be wide gaps between price and value in the market…’ An imperfect but reasonable way to gauge how sentiment around a company has changed is to compare earnings per share (EPS) with the stock price.

GTN has become profitable over the past five years. This would generally be seen as a positive, so we’re surprised to see the stock price down. Other metrics might give us a better idea of ​​how its value is changing over time.

Arguably, the revenue decline of 5.0% per year for half a decade suggests that the company cannot grow in the long term. This could explain the weakness in the share price.

You can see how earnings and income have changed over time below (find out the exact values ​​by clicking on the image).

earnings-and-revenue-growth

We know that GTN has recently improved its results, but what does the future hold? This free report showing analyst forecasts should help you form an opinion about GTN

What about dividends?

It is important to consider the total shareholder return, as well as the stock price return, for a given stock. TSR is a calculation of return that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of all discounted capital raisings and spinoffs. It’s fair to say that the TSR gives a more complete picture of stocks that pay a dividend. In the case of GTN, it shows a TSR of -83% over the last 5 years. This exceeds the performance of its share price that we mentioned earlier. And there’s no price guessing that dividend payouts largely explain the divergence!

A different perspective

While the broader market lost around 2.2% in the twelve months, GTN shareholders fared even worse, losing 5.2% (even including dividends). However, it could simply be that the stock price was impacted by greater market jitters. It might be worth keeping an eye on the fundamentals, in case there is a good opportunity. However, last year’s loss is not as severe as the 13% per year loss that investors have suffered over the past half-decade. We would need to see sustained improvements in key metrics before we could muster much enthusiasm. I find it very interesting to look at stock price over the long term as a proxy for company performance. But to really get insight, we also need to consider other information. For example, we have identified 3 warning signs for GTN (1 is concerning) of which you should be aware.

But note: GTN may not be the best stock to buy. So take a look at this free list of interesting companies with past earnings growth (and new growth forecasts).

Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently trading on AU exchanges.

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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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Robert D. Coleman