Emerson Electric (NYSE:EMR) stock performs better than its underlying earnings growth over last five years
It hasn't been the best quarter for Emerson Electric Co. (NYSE:EMR) shareholders, since the share price has fallen 15% in that time. On the other hand the returns over the last half decade have not been bad. It's good to see the share price is up 99% in that time, better than its market return of 98%.
On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.
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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...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During five years of share price growth, Emerson Electric achieved compound earnings per share (EPS) growth of 0.4% per year. This EPS growth is lower than the 15% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
This free interactive report on Emerson Electric'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 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. We note that for Emerson Electric the TSR over the last 5 years was 123%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
While the broader market gained around 5.1% in the last year, Emerson Electric shareholders lost 9.2% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 17% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. If you would like to research Emerson Electric in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.
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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