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Investors five-year losses grow to 37% as the stock sheds AU$663m this past week

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But every investor is virtually certain to have both over-performing and under-performing stocks. So we wouldn't blame long term Lendlease Group (ASX:LLC) shareholders for doubting their decision to hold, with the stock down 44% over a half decade. And we doubt long term believers are the only worried holders, since the stock price has declined 28% over the last twelve months. Unfortunately the share price momentum is still quite negative, with prices down 20% in thirty days. We do note, however, that the broader market is down 9.5% in that period, and this may have weighed on the share price.

If the past week is anything to go by, investor sentiment for Lendlease Group isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

View our latest analysis for Lendlease Group

Lendlease Group wasn't profitable in the last twelve months, it is unlikely we'll see a strong correlation between its share price and its earnings per share (EPS). Arguably revenue is our next best option. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

In the last five years Lendlease Group saw its revenue shrink by 12% 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 8% compound, over five years is well justified by the fundamental deterioration. We doubt many shareholders are delighted with this share price performance. Risk averse investors probably wouldn't like this one much.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growth
earnings-and-revenue-growth

Lendlease Group is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Lendlease Group in this interactive graph of future profit 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Lendlease Group the TSR over the last 5 years was -37%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We regret to report that Lendlease Group shareholders are down 27% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 6.4%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6% per year over five years. 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. It's always interesting to track share price performance over the longer term. But to understand Lendlease Group better, we need to consider many other factors. Take risks, for example - Lendlease Group has 1 warning sign we think you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.