Stepan (NYSE:SCL) shareholders have endured a 40% loss from investing in the stock three years ago
Since shareholders are down over the longer term, lets look at the underlying fundamentals over the that time and see if they've been consistent with returns.
Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, Stepan's earnings per share (EPS) dropped by 26% each year. This fall in the EPS is worse than the 17% compound annual share price fall. This suggests that the market retains some optimism around long term earnings stability, despite past EPS declines.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free interactive report on Stepan's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. In the case of Stepan, it has a TSR of -40% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
While the broader market gained around 13% in the last year, Stepan shareholders lost 33% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 6% over the last half decade. 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's always interesting to track share price performance over the longer term. But to understand Stepan better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Stepan (at least 1 which is significant) , and understanding them should be part of your investment process.
Stepan is not the only stock that insiders are buying. For those who like to find lesser know companies 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 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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Full Transcript This transcript was prepared by a transcription service. This version may not be in its final form and may be updated. Speaker 1: From the opinion pages of the Wall Street Journal, this is Potomac Watch. Kyle Peterson: The Trump administration's housing regulator accuses a Federal Reserve governor of mortgage fraud. Is this another spin down the lawfare spiral? Meantime, a New York Appeals Court throws out a penalty against Donald Trump of nearly half a billion dollars in Attorney General Letitia James' fraud case against the president. Welcome, I'm Kyle Peterson with the Wall Street Journal. We are joined today by my colleagues, columnist Allysia Finley and Kim Strassel. Bill Pulte is the director of the Federal Housing Finance Agency, the chairman of Fannie Mae & Freddie Mac, and perhaps also a MAGA political enforcer. President Trump is on a campaign to pressure the Federal Reserve to lower interest rates and now he has the opportunity to call for the resignation of Fed Governor Lisa Cook after an investigation by Pulte's agency. Here is what Bill Pulte said on social media today on June 18th, 2021, Lisa Cook signed mortgage documents identifying her Michigan residence as her primary residence. Two weeks later, on July 2nd, 2021, she purchased a condo in Atlanta and identified it as her primary residence. Yesterday Pulte posted a criminal referral letter to the Justice Department related to this matter, suggesting that it believes that Cook perhaps falsified bank documents and property records in order to potentially secure lower interest rates and more favorable loan terms. Cook has issued a statement saying that she only learned of these allegations from Pulte when they were posted on social media and she is now gathering documents. She says she'll, "Take any questions about my financial history seriously as a member of the Federal Reserve. So I am gathering the accurate information to answer any legitimate questions and provide the facts," unquote. Let's listen to a clip of Bill Pulte. Here he is yesterday explaining his view of this matter on CNBC. Bill Pulte: In my view, many of this is what caused '08. My family founded Pulte Homes. I grew up in that business. I saw the housing market crash. We cannot go back there, so it doesn't matter whether you're Fed Governor Cook or Joe Blow on the street. If you commit mortgage fraud, we are going to report it, and this is no different and we do it every day. We will look at any allegation of mortgage fraud and we do not care whether you're a Republican, a Democrat, we do not care whether you're wealthy, we don't care whether you're a prosecutor, we don't care whether you're a Fed governor. If you commit mortgage fraud and you present an existential threat to the federal home loan banks, Fannie or Freddie, we are going to prosecute it. Period. Kyle Peterson: Allysia, what's your view of what's going on here? Allysia Finley: Well, I think what Bill Pulte just said is fair and fine as far as it goes. One problem is the way that the FHFA is going about supposedly or allegedly prosecuting this mortgage fraud, and that is by airing these accusations in social media publicly, or in many cases or in another case involving Adam Schiff leaking them to the press. And that is notably why you've now had three high profile figures, all Democratic or opponents of Donald Trump now become entangled in these accusations. And the accusations against all three, Letitia James, Adam Schiff, and now Lisa Cook are somewhat similar. Bill Pulte claims that they falsified or misrepresented information claiming the different residences were primary residences when they were in fact either vacation homes or investment properties in order to get better loan terms or lower rates. We don't know how broad this problem is. It seems like if these are three figures that have been caught, there are probably many others, and obviously probably not are Democrats, but it's pretty clear that Donald Trump is using this or is trying to weaponize the agency now to go after his opponents. Now, Lisa Cook hasn't been overly critical of Donald Trump, unlike Adam Schiff or Letitia James, she was appointed by President Biden. Her economic record admittedly is very spotty. Most of her writings have been on race reparations and those kinds of sociological issues, so I would've argued, and we did argue that she wasn't qualified for the Fed when she was appointed, but President Trump's bugaboo seems to be more with the fact that she has aligned with Jay Powell in favoring no rate cuts and he wants interest rates cut. So that seems to be what is driving this latest prosecution. Kyle Peterson: Kim, it does seem like this process is backward from how we normally think about law enforcement, which is an investigation happens first and then maybe there's a criminal referral, maybe someone is indicted, maybe there's a legal case, and then come the calls for resignation, and this is going the other direction. We have a social media allegation, a referral that is being made to the Justice Department, President Trump now calling on Cook to step down as a Federal Reserve governor, and I have no idea, to be clear, what is in Lisa Cook's mortgage documents. There's some reporting. This is from a Journal news story on mortgage fraud generally. It says that the down payment on a primary residence can be as low as 3% to 5%. For a second home it's typically 10 to 20. For an investment property, it's usually at least 20. The rates on second homes are typically higher, something like a quarter of a percentage point to half a percentage point. Again, according to this Journal news story, but it says also this. There are circumstances in which a borrower can legally own two different houses financed with principal residence mortgages, especially when the purchases are separated by more than one year. Consider a borrower who buys a home to live in and then gets a job transfer a few years later, the person could buy another home in the new city where the job is as a principal residence while keeping the initial home as a rental. Part of what Pulte is saying here is that a year after these transactions, the condo in Atlanta that Cook purchased was put up for rent. But Kim, that is exactly the point is it seems like those are the kinds of details and questions that ought to be asked. Maybe they will be asked in the middle of this criminal referral, but before there was a public accusation, there's a reason why law enforcement agencies typically do not comment unless they bring a case. Kimberley A. Strassel: The facts really matter here, the details really matter here, and that's what elevates this to look like political lawfare. And if you disassemble that word, what does it mean? Okay, the law is the law. Everyone must follow the law. We all understand that. The problem is when people take the law, they twist it, they inject it into the political sphere, they use it as a pressure point. That's when we start talking about political warfare, lawfare And the issue here is not the accusation or even the existence of a government probe into what this Fed governor has done. It's the broadcasting of it, the threats involved with it, the argument that this is clearly political pressure designed to convince Cook to either change her mind on rate cuts or to resign and allow Donald Trump to put someone in the position that is more favorable to his views. I just want to put forward a parallel because I feel deeply about this lawfare thing and have written about it a lot. You go back to early 2016, the FBI gets some chatter that Trump team maybe has some unsavory connections with Russia. We don't want foreign infiltration of our politics, and there's nothing wrong with the FBI taking a look where it went off the rails and became lawfare was the decision then to actively work with the opposing political team, Hillary Clinton's on this Steele dossier to leak it to the press, to turn it into the story that it became before the FBI itself knew the facts. Worse, for the FBI to continue working on this when they knew there was bogus aspects of it to elevate, get a FISA warrant investigation. That's what turned it from a legitimate question into lawfare. I mean, you could do the same example with Jack Smith. Career informed prosecutors had already looked very closely at the circumstances in January 6th and found no legal basis to bring any cases against Trump. The appointment of Smith, the very public nature of it, the airing of the allegations, the contorted way that he manufactured these charges, his rushed attempt to get it done before an election is what made it lawfare. And there's some evidence here that maybe Lisa Cook maybe did something inappropriate, maybe, but the public nature of this and the pressure turns it into something else. We don't or shouldn't want law and order this way. It is, as you say, Kyle, why DOJ doesn't release details, and they also don't release details if they choose not to prosecute because it's character assassination. The decision to post this is bad. The decision to use it as a threat is bad. Again, go and do your due diligence and if there is something to bring a charge on, bring the charge. But don't wage this in the public. Kyle Peterson: Hang tight. We'll be right back in a moment. Welcome back, Allysia, to the point about whether any of these officials did something wrong, the phrase you used a moment ago was it's fine as far as it goes. But one of the questions that are raised by this is what is the pattern and the procedure that is bringing these mortgage documents to light at the Federal Housing Finance Authority? Because now Pulte has made this referral for Cook. He has made a referral for Senator Adam Schiff of California. He's made a referral for New York Attorney General Letitia James. Here is a piece of the letter that he sent to the DOJ about this Cook affair. It says, "In the course of exercising US Federal Housing's, authorities under the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, it has identified matters that are appropriate for referral. But Allysia, what do you make of this three referrals of people who are crosswise, maybe might be one way to put it with the president of the United States. I mean, is Bill Pulte just pulling mortgage documents for people who are no fans of Donald Trump and looking through them and seeing what they say? Allysia Finley: Well, I think that'd be the Occam's Razor, Fannie Mae, Freddie Mac guarantee about half of single family residential mortgages, and that means they guarantee millions and millions of homeowners. Why are they now looking at the records of particular homeowners? They're not saying that they're conducting a broad investigation, and there are questions of how pervasive this problem is. There was a Federal Reserve of Philadelphia Bank study from 2023 that noted prior to the 2008/2009 meltdown that you had many people claiming that they were primary residences when they were in fact institutional investors or small investors. And this contributed to the mortgage meltdown. I mean so far that many of them were higher risk borrowers and were more likely to default. Now, that study also noted that the problem continues to be pervasive, and that suggests that they estimated in the tens of thousands of borrowers who are doing this. Now, why does the Trump administration appear to be out these three cases? I mean, maybe, we don't know, maybe they are making other referrals, but to get this information, you'd actually have to look at the individual mortgage filers. Now, I would say this, that all this raises questions about the underwriting of the mortgage lenders and Fannie Mae & Freddie Mac, and to what extent were they doing due diligence to ensure that they were actual primary residences rather than investment properties or second homes. I'd also say that there is a strong good reason for Fannie and Freddie to no longer guarantee loans for second homes. Recall that the Fannie Mae & Freddie Mac, their intent or their mission is to provide or help make housing more affordable for the middle class. And when you're starting to guarantee or provide guarantee mortgages for second homes, these are not the middle class people. Kyle Peterson: It's true, Kim, that we don't know whether there are other referrals being made. Maybe the Pulte administration of that agency is doing a broader review, but it does raise the question of the disparate treatment of people who are in public positions of authority and no fans of the president, that they are the ones whose referrals are being tweeted and aired on social media. It is also true on the point about lawfare, there's some interesting parallels here with the civil fraud case that New York Attorney General Letitia James brought against President Trump because this is another situation where there's fraud claims being thrown around and no proof, no evidence that anybody lost any money as a result of that. And I expect that as part of what you may hear from Republicans and Trump's backers, MAGA fans as a result of these investigations and these referrals and the magnitudes of the money involved are obviously much larger in that civil fraud case. But Kim, that is part of why I think there was many people saying that this is the beginning of the fraud spiral. And Letitia James and the prosecutions of Donald Trump were going to lead somewhere that the country did not necessarily want to go. And here we are. Kimberley A. Strassel: Oh, let's be clear. Lawfare was largely invented and refined by Democrats, and that's been the theme basically since Donald Trump came to office. They struggled to beat them at the ballot box. They went all in to try to come up, especially in the last five years, with cases that would disqualify him for even becoming president. In some ways, those cases were much higher stakes than what we see the allegations right now. I mean, they were using lawfare in attempt to hold the office of the presidency hostage or keep it out of the hands of the nominee of the Republican Party. And this case, we went through a chapter and verse that Letitia James brought, it was absurd at so many levels. It was essentially a victimless crime if you even called it a crime. And does that mean that, are there not people like Donald Trump, investors who are overstating the valuations of their properties and documents, but there were a lot of willing participants and all of that and nobody came out the worst for it. So you had to kind of wonder what the effort was other than political. But that gets to these allegations. It cannot be a coincidence that the first referral here in April that Pulte made was against Letitia James for a very similar area of, I mean, again, also dealing with financial records. And it was sort of about, it almost, it smacked very much of turnabout is fair play. The problem of course is that Donald Trump came to office promising that he was going to end lawfare. And that was something that a lot of Americans liked to hear. They don't like this process of twisting and abusing the law for political gain. And I think Allysia notice is really important here. We may well have a big problem with fraud in mortgage documents. If that is the case, that is another massive failure of the federal government. I mean, many of us who deal with underwriters outside of Fannie Mae & Freddie Mac know the tyranny of underwriters. They fly spec every last thing in your life. It can be one of the more painful aspects of going through a property purchase. It does not seem the federal government is exacting that level of due diligence if we're having this kind of level of fraud. So maybe we do need to dig down into that and maybe there are lots of other people that are getting pulled up in this investigation. But guess what? We're not hearing about them. And I appreciate Bill Pulte's point about how this is a problem. But you're not hearing about random Jill or Jack and their issues from the head of the entire federal housing agency, it's only being focused on political figures who happen to also be on the other side of the aisle from this administration. Kyle Peterson: Hang tight. We'll be right back after one more break. Don't forget, you can reach the latest episode of Potomac Watch anytime. Just ask your smart speaker, "Play the Opinion; Potomac Watch podcast." Speaker 1: From the opinion pages of the Wall Street Journal. This is Potomac Watch. Kyle Peterson: Welcome back. It does bear noting that there are a couple of potential responses to lawfare. One of them is to do moral lawfare in the other direction and one of them is to cut it out. And the second is what President Trump promised when he was on the campaign trail. He signed some executive orders in his early days in office talking about stopping the weaponization of law enforcement, the weaponization of government agencies. He has appealed some of those cases against him. And notably today on Thursday, we got a ruling from an appeals court in New York throwing out that massive civil fraud fine. In that civil case brought against him by Letitia James, he and his co-defendants had been ordered to pay about $360 million. That has risen with interest to something closer to a half a billion dollars. There are 323 pages of opinions and analysis by this panel of New York Appeals judges. I have not had a chance to look at it all yet, but here is a fragment of the top opinion. It says, while the injunctive relief ordered by the court is well crafted to curb defendants' business culture, the court's disgorgement order, which directs that defendants pay nearly half a billion dollars to the State of New York is an excessive fine that violates the eighth Amendment of the United States Constitution. So that part, at least Allysia, a clear victory for the president. I'm not sure what the ultimate outcome will be, if that will go down to the lower courts and get a different lower number for the fine, the penalty assessed on Trump and his defendants in that case. But again, that is one potential response to the spate of lawfare that we have had is President Trump can, and in some cases does say we are a country that still has the rule of law. We have appeals courts. Here's a place that he won. And yet he seems to be leaning in in some cases to lawfare in the other direction. Allysia Finley: Right. He seems to very much want revenge against many of his opponents. He once said his victory would be the best retribution or best revenge, but that's not how he's acting in practice. Now, I'd also point out on the New York Appeals opinion, the way that the lower court judge who determined the penalty was in a very questionable way. It brought in a Democratic consultant to determine what the difference was between the interest rate Trump should have paid and actually did pay for these loans. And then assess the penalty on how much properties he sold for versus when he bought them. And just really tacked on fees and fines that really were excessive. And I think at least the appeals court here in this case is sending a good message to the state and Letitia James not to try to overreach and abuse their authority, but also I think they were leery of letting Trump off the hook altogether. Now courts, I think the courts are the ultimate arbitrator in a lot of these cases, who knows if Letitia James, Adam Schiff, or now Lisa Cook will ultimately be prosecuted, but their cases will ultimately lie in the courts. And I think that that's one consolation to people who are concerned about this weaponization, is that I think you ultimately will get a fair hearing and due process in at least the federal courts, and it looks like in the state courts too. Kyle Peterson: And that's a big deal, Kim. That is not something to sniff at, being a country with the rule of law. On the other hand, it is still pretty corrosive to have one party, much less both parties taking all that stuff to the courts and trying their very best to use the law and use these kinds of cases to knock their opponents out of the political arena. Kimberley A. Strassel: Yeah, I mean, look, I think we should all take some comfort that this is often what happens in the courts. And we're talking about this particular case of Letitia James, but I mentioned January 6th earlier. That was another one in which Donald Trump took his case. It ended up going all the way to the Supreme Court and we ended up getting this ruling from the Supreme Court about the outer bounds of presidential immunity. But one big side question here is not just the drama it puts the country through. I mean, this sort of constant new area of watching these headlines about this or that judge and court case and the lawsuits that are all coming through, but the immense burden on court time dealing with some of these esoteric and twisted definitions of the law, many of which just on their face are really quite farcical. And yet judges sometimes indulge them and it can cost a great deal of money for both plaintiffs and defendants and the court system. But in any event, regardless of whether they indulge them or not, I mean, it just sucks up court time. And court time isn't limitless, it's not infinite. And you would like to think that we weren't clogging up our judicial system with debates and fights that, let's be clear, need to be settled in the political arena. If you don't like your political opponent and you don't like what they're doing, make your case for it and win more people to office so that you can institute your agenda. But turning to the courts is sort of an admission that you don't have a good argument on your own. And I think Republicans need to think hard about that as they go down this path of turning around and using lawfare themselves. Kyle Peterson: Thank you, Kim and Allysia, thank you all for listening. You can email us at pwpodcast@ If you like the show, please hit that subscribe button and we'll be back tomorrow with another edition of Potomac Watch.
