Incitec Pivot's(ASX:IPL) Share Price Is Down 35% Over The Past Three Years.

Incitec Pivot’s(ASX:IPL) Share Price Is Down 35% Over The Past Three Years.

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 Incitec Pivot Limited (ASX:IPL) shareholders, since the share price is down 35% in the last three years, falling well short of the market return of around 39%. Furthermore, it’s down 12% in about a quarter. That’s not much fun for holders.

Check out our latest analysis for Incitec Pivot

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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).

During the three years that the share price fell, Incitec Pivot’s earnings per share (EPS) dropped by 21% each year. In comparison the 13% compound annual share price decline isn’t as bad as the EPS drop-off. So the market may not be too worried about the EPS figure, at the moment – or it may have previously priced some of the drop in. With a P/E ratio of 49.12, it’s fair to say the market sees a brighter future for the business.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. It might be well worthwhile taking a look at our free report on Incitec Pivot’s earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Incitec Pivot’s TSR for the last 3 years was -33%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!

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A Different Perspective

Incitec Pivot shareholders are up 32% for the year (even including dividends). But that was short of the market average. But at least that’s still a gain! Over five years the TSR has been a reduction of 3% per year, over five years. So this might be a sign the business has turned its fortunes around. It’s always interesting to track share price performance over the longer term. But to understand Incitec Pivot better, we need to consider many other factors. Case in point: We’ve spotted 2 warning signs for Incitec Pivot you should be aware of.

Incitec Pivot is not the only stock that insiders are buying. For those who like to find winning investments this free list of growing 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 AU 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

Why the Incitec Pivot (ASX:IPL) share price is racing 8% higher today

The company’s shares are continuing their positive run this week…

The Incitec Pivot Ltd (ASX: IPL) share price is soaring during morning trade following a manufacturing and business update.

At the time of writing, the industrial chemicals company’s shares are up by 8.02% to $2.62.

What did Incitec Pivot announce?

Investors are buying up Incitec Pivot’s shares after the company revealed it is implementing changes to its manufacturing model.

According to its release, Incitec Pivot is switching its manufacturing model from a global to a regional structure. This will allow the company to improve its manufacturing excellence strategy and support operations, while international travel is restricted.

As a result, Incitec Pivot president of global manufacturing and health, safety and environment Tim Wall will be leaving the company.

A global search is underway to find a new manufacturing lead. In the interim, regional manufacturing vice presidents will report to the heads of the Americas and Asia Pacific regions.

Incitec Pivot CEO and managing director Jeanne Johns commented:

I would like to thank Tim for his considerable contributions to IPL. Tim’s tireless efforts are deeply appreciated as well as his support with our transition to a regional manufacturing model.

Incitec Pivot noted additional resources have been allocated to the Americas manufacturing team to assist with the transition to a regional model.

On a different note, the company revealed its Waggaman ammonia plant in Louisiana reached full production last month. Its capacity is 800,000 metric tonnes of ammonia.

Furthermore, its Moranbah ammonium nitrate plant in Queensland is running smoothly, and FY21 planned turnarounds are complete.

Incitec Pivot said it will release a trading update on 29 July 2021.

About the Incitec Pivot share price

In 2021, Incitec Pivot shares have lifted by 14%, and are up by almost 40% over the past 12 months. In addition, the company’s share price has a 52-week range of $1.81 to $2.98.

Incitec Pivot has a market capitalisation of around $4.7 billion, with close to 2 billion shares outstanding.

UBS rates the stock as Buy – ShareCafe

In-line with the expectations of UBS, management has announced the Waggaman ammonia plant was successfully re-started and has been operating at nameplate production since 1 June.

The broker estimates the current share price appears to imply a FY22 DAP price of US$370t versus spot of US$575t, and an Ammonia price of US$370t versus spot of US$585t. The analyst raises the target price to $2.91 from $2.88 and maintains the Buy rating.

Sector: Materials.

Target price is $2.91.Current Price is $2.57. Difference: $0.34 – (brackets indicate current price is over target). If IPL meets the UBS target it will return approximately 12% (excluding dividends, fees and charges – negative figures indicate an expected loss).