If you buy and hold a stock for many years, you'd hope to be making a profit. But more than that, you probably want to see it rise more than the market average. But MetLife, Inc. (NYSE:MET) has fallen short of that second goal, with a share price rise of 60% over five years, which is below the market return. On a brighter note, more newer shareholders are probably rather content with the 24% share price gain over twelve months.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
MetLife's earnings per share are down 7.4% per year, despite strong share price performance over five years.
Essentially, it doesn't seem likely that investors are focused on EPS. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.
It is not great to see that revenue has dropped by 0.02% per year over five years. So it seems one might have to take closer look at earnings and revenue trends to see how they might influence the share price.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
We know that MetLife has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for MetLife in this interactive graph of future profit estimates.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, MetLife's TSR for the last 5 years was 91%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
MetLife's TSR for the year was broadly in line with the market average, at 27%. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 14%. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. It's always interesting to track share price performance over the longer term. But to understand MetLife better, we need to consider many other factors. For instance, we've identified 1 warning sign for MetLife that you should be aware of.
For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.
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.
