Nasdaq
华尔街日报The three-year underlying earnings growth at Visteon (NASDAQ:VC) is promising, but the shareholders are still in the red over that time
In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. 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 Visteon Corporation (NASDAQ:VC) shareholders, since the share price is down 22% in the last three years, falling well short of the market return of around 87%. Furthermore, it's down 20% in about a quarter. That's not much fun for holders.
If the past week is anything to go by, investor sentiment for Visteon isn't positive, so let's see if there's a mismatch between fundamentals and the share price.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Although the share price is down over three years, Visteon actually managed to grow EPS by 38% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.
It's worth taking a look at other metrics, because the EPS growth doesn't seem to match with the falling share price.
The modest 1.1% dividend yield is unlikely to be guiding the market view of the stock. The company has kept revenue pretty healthy over the last three years, so we doubt that explains the falling share price. We're not entirely sure why the share price is dropped, but it does seem likely investors have become less optimistic about the business.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Visteon is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Visteon stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
Visteon provided a TSR of 17% over the year (including dividends). That's fairly close to the broader market return. The silver lining is that the share price is up in the short term, which flies in the face of the annualised loss of 4% over the last five years. While 'turnarounds seldom turn' there are green shoots for Visteon. 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. For example, we've discovered 2 warning signs for Visteon (1 doesn't sit too well with us!) that you should be aware of before investing here.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).
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.