The three-year profit decline likely contributed to Manchester United (NYSE: MANU) shareholders’ losses of 22% during this period
In order to justify the effort of selecting individual stocks, it is worth striving to beat the returns of a market index fund. But if you try your hand at stock picking, your risk of coming back less than the market. Unfortunately, this is the case in the longer term. Manchester united plc (NYSE: MANU), since the stock price has fallen 24% over the past three years, well below the market return of around 102%. Plus, it’s down 22% in about a quarter. It’s not a lot of fun for the holders.
Given that Manchester United have lost Â£ 126million over their value over the past 7 days, let’s see if the longer term decline is due to the company’s economy.
Manchester United have not been profitable over the past twelve months, we are unlikely to see a strong correlation between their stock price and their earnings per share (EPS). Arguably income is our next best option. Shareholders of unprofitable companies generally expect strong revenue growth. Indeed, the rapid growth in income can be easily extrapolated to the expected profits, often of considerable size.
Over the past three years, Manchester United’s revenues have fallen 9.3% annually. This is not what investors generally want to see. The stock has disappointed holders over the past three years, falling 7% annualized. And with no profits and low income, are you surprised? However, in this kind of situation, sometimes you can find opportunities, where the sentiment is negative but the business is actually making progress.
The graph below illustrates the evolution of earnings and income over time (reveal the exact values ââby clicking on the image).
NYSE: MANU Profit and Revenue Growth December 19, 2021
If you are thinking of buying or selling Manchester United shares, you should check this out FREE detailed report on its balance sheet.
What about dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. While the share price return reflects only the change in the share price, the TSR includes the value of dividends (assuming they have been reinvested) and the benefit of any capital increase or spin-off. updated. Arguably, the TSR gives a more complete picture of the return generated by a stock. In the case of Manchester United, they have a TSR of -22% for the past 3 years. This exceeds its share price return that we mentioned earlier. The dividends paid by the company thus boosted the total shareholder return.
A different perspective
While the broader market gained around 18% last year, Manchester United shareholders lost 14% (including dividends). Even good stock prices drop sometimes, but we want to see improvements in the fundamentals of a business, before we get too interested. On the plus side, long-term shareholders made money, gaining 0.3% per year over half a decade. The recent sell-off may be an opportunity, so it may be worth checking the fundamentals for signs of a long-term growth trend. It is always interesting to follow the evolution of stock prices over the long term. But to understand Manchester United better, there are many other factors that we need to take into account. Consider, for example, the ever-present specter of investment risk. We have identified 2 warning signs with Manchester United, and understanding them should be part of your investment process.
If you like to buy stocks alongside management then you might love this free list of companies. (Hint: insiders bought them).
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks that currently trade on the US stock exchanges.
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