Yahoo Finance Gen Digital (NASDAQ:GEN) shareholders are still up 47% over 5 years despite pulling back 3.3% in the past week
The main aim of stock picking is to find the market-beating stocks. But the main game is to find enough winners to more than offset the losers At this point some shareholders may be questioning their investment in Gen Digital Inc. (NASDAQ:GEN), since the last five years saw the share price fall 23%.
Since Gen Digital has shed US$493m from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.
View our latest analysis for Gen Digital
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Gen Digital 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 may better explain the share price move.
It could be that the revenue decline of 8.9% per year is viewed as evidence that Gen Digital is shrinking. This has probably encouraged some shareholders to sell down the stock.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. You can see what analysts are predicting for Gen Digital in this interactive graph of future profit estimates.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Gen Digital, it has a TSR of 47% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While it's never nice to take a loss, Gen Digital shareholders can take comfort that , including dividends,their trailing twelve month loss of 13% wasn't as bad as the market loss of around 19%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 8% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. 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. Case in point: We've spotted 5 warning signs for Gen Digital you should be aware of, and 1 of them shouldn't be ignored.
Gen Digital 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.
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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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