Yahoo Finance Goodyear Tire & Rubber's (NASDAQ:GT) Stock Price Has Reduced 66% In The Past Five Years
The Goodyear Tire & Rubber Company (NASDAQ:GT) shareholders should be happy to see the share price up 27% in the last month. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. The share price has failed to impress anyone , down a sizable 66% during that time. Some might say the recent bounce is to be expected after such a bad drop. We'd err towards caution given the long term under-performance.
See our latest analysis for Goodyear Tire & Rubber
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 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.
Over five years Goodyear Tire & Rubber's earnings per share dropped significantly, falling to a loss, with the share price also lower. Since the company has fallen to a loss making position, it's hard to compare the change in EPS with the share price change. However, we can say we'd expect to see a falling share price in this scenario.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Goodyear Tire & Rubber's 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. Dividends have been really beneficial for Goodyear Tire & Rubber shareholders, and that cash payout explains why its total shareholder loss of 62%, over the last 5 years, isn't as bad as the share price return.
A Different Perspective
Goodyear Tire & Rubber shareholders are down 30% for the year, but the market itself is up 25%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 10% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. 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. To that end, you should learn about the 2 warning signs we've spotted with Goodyear Tire & Rubber (including 1 which is is concerning) .
We will like Goodyear Tire & Rubber 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.
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. 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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