Investing in LyondellBasell Industries (NYSE:LYB) five years ago would have delivered you a 51% gain

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you’d generally like to see the share price rise faster than the market. But LyondellBasell Industries N.V. (NYSE:LYB) has fallen short of that second goal, with a share price rise of 12% over five years, which is below the market return. Over the last twelve months the stock price has risen a very respectable 8.9%.

Let’s take a look at the underlying fundamentals over the longer term, and see if they’ve been consistent with shareholders returns.

View our latest analysis for LyondellBasell Industries

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

LyondellBasell Industries’ earnings per share are down 12% per year, despite strong share price performance over five years.

Since the EPS are down strongly, it seems highly unlikely market participants are looking at EPS to value the company. The falling EPS doesn’t correlate with the climbing share price, so it’s worth taking a look at other metrics.

We note that the dividend is higher than it was previously – always nice to see. Maybe dividend investors have helped support the share price. We’d posit that the revenue growth over the last five years, of 7.7% per year, would encourage people to invest.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

earnings-and-revenue-growthearnings-and-revenue-growth

earnings-and-revenue-growth

LyondellBasell Industries is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So it makes a lot of sense to check out what analysts think LyondellBasell Industries will earn in the future (free analyst consensus 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. 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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for LyondellBasell Industries the TSR over the last 5 years was 51%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

LyondellBasell Industries shareholders are up 15% for the year (even including dividends). But that was short of the market average. On the bright side, that’s still a gain, and it’s actually better than the average return of 9% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. It’s always interesting to track share price performance over the longer term. But to understand LyondellBasell Industries better, we need to consider many other factors. Take risks, for example – LyondellBasell Industries has 4 warning signs we think you should be aware of.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.

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

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.


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