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As an investor its worth striving to ensure your overall portfolio beats the market average. But if you try your hand at stock picking, you risk returning less than the market. We regret to report that long term Truist Financial Corporation (NYSE:TFC) shareholders have had that experience, with the share price dropping 22% in three years, versus a market return of about 38%. Shareholders have had an even rougher run lately, with the share price down 19% in the last 90 days. Of course, this share price action may well have been influenced by the 8.6% decline in the broader market, throughout the period.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
Truist Financial 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 hope to see good revenue growth. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.
Over the last three years, Truist Financial's revenue dropped 21% per year. That's definitely a weaker result than most pre-profit companies report. With revenue in decline, the share price decline of 7% per year is hardly undeserved. The key question now is whether the company has the capacity to fund itself to profitability, without more cash. The company will need to return to revenue growth as quickly as possible, if it wants to see some enthusiasm from investors.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We consider it positive that insiders have made significant purchases in the last year. Even so, future earnings will be far more important to whether current shareholders make money. This free report showing analyst forecasts should help you form a view on Truist Financial
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Truist Financial's TSR for the last 3 years was -8.6%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!