Further weakness as Goodyear Tire & Rubber (NASDAQ:GT) drops 22% this week, taking five

Stock Analysis

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in The Goodyear Tire & Rubber Company (NASDAQ:GT), since the last five years saw the share price fall 47%. The last week also saw the share price slip down another 22%. This could be related to the recent financial results - you can catch up on the most recent data by reading our company report.

Since Goodyear Tire & Rubber has shed US$1.0b from its value in the past 7 days, let's see if the longer term decline has been driven by the business' economics.

View our latest analysis for Goodyear Tire & Rubber

Goodyear Tire & Rubber isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. When a company doesn't make profits, we'd generally expect to see good revenue growth. As you can imagine, fast revenue growth, when maintained, often leads to fast profit growth.

Over five years, Goodyear Tire & Rubber grew its revenue at 7.8% per year. That's a fairly respectable growth rate. Shareholders have seen the share price fall at 8% per year, for five years: a poor performance. Clearly, the expectations from back then have not been satisfied. There is always a big risk of losing money yourself when you buy shares in a company that loses money.

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

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

We've already covered Goodyear Tire & Rubber's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Goodyear Tire & Rubber shareholders, and that cash payout explains why its total shareholder loss of 44%, over the last 5 years, isn't as bad as the share price return.

Goodyear Tire & Rubber shareholders are down 8.0% for the year, but the market itself is up 9.0%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 8% doled out over the last five years. We'd need to see some sustained improvements in the key metrics before we could muster much enthusiasm. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for Goodyear Tire & Rubber you should be aware of.

But note: Goodyear Tire & Rubber may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

What are the risks and opportunities for Goodyear Tire & Rubber?

NasdaqGS:GT

Goodyear Tire & Rubber

The Goodyear Tire & Rubber Company, together with its subsidiaries, develops, manufactures, distributes, and sells tires and related products and services worldwide.Show more

Rewards

Trading at 15.8% below our estimate of its fair value

Earnings are forecast to grow 68.88% per year

Risks

Interest payments are not well covered by earnings

Share Price

Market Cap

1Y Return

Further research onGoodyear Tire & Rubber

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The Goodyear Tire & Rubber Company, together with its subsidiaries, develops, manufactures, distributes, and sells tires and related products and services worldwide.

Good value with moderate growth potential.