General Electric (NYSE:GE) adds US$4.0b to market cap in the past 7 days, though investors from five years ago are still down 58%

Statistically speaking, long term investing is a profitable endeavour. But unfortunately, some companies simply don't succeed. To wit, the General Electric Company (NYSE:GE) share price managed to fall 62% over five long years. That is extremely sub-optimal, to say the least. And it's not just long term holders hurting, because the stock is down 34% in the last year. But it's up 5.6% in the last week.

The recent uptick of 5.6% could be a positive sign of things to come, so let's take a lot at historical fundamentals.

Check out our latest analysis for General Electric

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

During five years of share price growth, General Electric moved from a loss to profitability. On the other hand, it reported a trailing twelve months loss, suggesting it isn't reliably profitable. Other metrics may better explain the share price move.

We don't think that the 0.5% is big factor in the share price, since it's quite small, as dividends go. Arguably, the revenue drop of 10% a year for half a decade suggests that the company can't grow in the long term. That could explain the weak share price.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

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. You can see what analysts are predicting for General Electric in this interactive graph of future profit estimates.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, General Electric's TSR for the last 5 years was -58%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that General Electric shareholders are down 34% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 25%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 10% per year over five years. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

General Electric 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 US 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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