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As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. Unfortunately, that's been the case for longer term United States Cellular Corporation (NYSE:USM) shareholders, since the share price is down 37% in the last three years, falling well short of the market return of around 35%. And over the last year the share price fell 21%, so we doubt many shareholders are delighted. The falls have accelerated recently, with the share price down 10% in the last three months. But this could be related to the weak market, which is down 13% in the same period.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
Check out our latest analysis for United States Cellular
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
United States Cellular saw its EPS decline at a compound rate of 3.0% per year, over the last three years. This reduction in EPS is slower than the 14% annual reduction in the share price. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on United States Cellular's earnings, revenue and cash flow.
A Different Perspective
We regret to report that United States Cellular shareholders are down 21% for the year. Unfortunately, that's worse than the broader market decline of 15%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 4% 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. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with United States Cellular (at least 1 which is a bit unpleasant) , and understanding them should be part of your investment process.