Yahoo Finance Investors more bullish on Citigroup (NYSE:C) this week as stock lifts 7.4%, despite earnings trending downwards over past year
If you want to compound wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual stocks, you could make more than that. To wit, the Citigroup Inc. (NYSE:C) share price is 33% higher than it was a year ago, much better than the market return of around 25% (not including dividends) in the same period. So that should have shareholders smiling. On the other hand, longer term shareholders have had a tougher run, with the stock falling 14% in three years.
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
Check out our latest analysis for Citigroup
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the last year, Citigroup actually saw its earnings per share drop 53%.
So we don't think that investors are paying too much attention to EPS. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
Revenue was pretty stable on last year, so deeper research might be needed to explain the share price rise.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
Citigroup is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Citigroup stock, you should check out this free report showing analyst consensus estimates for future profits.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Citigroup, it has a TSR of 39% for the last 1 year. 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
It's good to see that Citigroup has rewarded shareholders with a total shareholder return of 39% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 1.4% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. It's always interesting to track share price performance over the longer term. But to understand Citigroup better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Citigroup you should be aware of.
But note: Citigroup may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
