Many investors define successful investing as beating the market average over the long term. But in any portfolio, there are likely to be some stocks that fall short of that benchmark. Unfortunately, that's been the case for longer term International Game Technology PLC (NYSE:IGT) shareholders, since the share price is down 54% in the last three years, falling well short of the market return of around 44%. Unfortunately the share price momentum is still quite negative, with prices down 12% in thirty days.
International Game Technology isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.
Over the last three years, International Game Technology's revenue dropped 4.2% per year. That's not what investors generally want to see. With revenue in decline, and profit but a dream, we can understand why the share price has been declining at 15% per year. Having said that, if growth is coming in the future, now may be the low ebb for the company. We don't generally like to own companies that lose money and can't grow revenues. But any company is worth looking at when it makes a maiden profit.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
International Game Technology is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts
What about the Total Shareholder Return (TSR)?
We've already covered International Game Technology's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. International Game Technology's TSR of was a loss of 47% for the 3 years. That wasn't as bad as its share price return, because it has paid dividends.
A Different Perspective
Investors in International Game Technology had a tough year, with a total loss of 18%, against a market gain of about 23%. 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. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 3% 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. Shareholders might want to examine this detailed historical graph of past earnings, revenue and cash flow.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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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