Buying a low-cost index fund will get you the average market return. But across the board there are plenty of stocks that underperform the market. That's what has happened with the Illinois Tool Works Inc. (NYSE:ITW) share price. It's up 23% over three years, but that is below the market return. Unfortunately, the share price has fallen 11% over twelve months.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Illinois Tool Works
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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 three years of share price growth, Illinois Tool Works achieved compound earnings per share growth of 4.5% per year. In comparison, the 7% per year gain in the share price outpaces the EPS growth. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. That's not necessarily surprising considering the three-year track record of earnings growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
NYSE:ITW Earnings Per Share Growth September 30th 2022
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. It might be well worthwhile taking a look at our free report on Illinois Tool Works' earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Illinois Tool Works' TSR for the last 3 years was 32%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While it's never nice to take a loss, Illinois Tool Works shareholders can take comfort that , including dividends,their trailing twelve month loss of 8.8% wasn't as bad as the market loss of around 20%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 7% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Illinois Tool Works , and understanding them should be part of your investment process.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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.
购买低成本指数基金将为你带来平均市场回报。但从整体来看,有大量股票表现逊于大盘。这就是发生在伊利诺伊机械。(纽约证券交易所代码:ITW)股价。它在三年内上涨了23%,但这低于市场回报率。不幸的是,该公司股价在12个月内下跌了11%。
考虑到这一点,值得关注的是,该公司的潜在基本面是长期业绩的驱动力,还是存在一些差异。
查看我们对伊利诺伊州工具厂的最新分析
在他的文章中格雷厄姆和多德斯维尔的超级投资者沃伦·巴菲特描述了股价并不总是理性地反映一家企业的价值。考察市场情绪如何随时间变化的一种方法是观察一家公司的股价和每股收益(EPS)之间的相互作用。
在三年的股价增长中,伊利诺伊州工具厂实现了每股复合收益每年4.5%的增长。相比之下,股价每年7%的涨幅超过了每股收益的增长。这表明,在经历了过去几年的上涨后,市场对该股的看法变得更加乐观。考虑到三年来盈利增长的记录,这并不一定令人惊讶。
您可以在下图中看到EPS是如何随着时间的推移而变化的(单击图表可查看精确值)。
纽约证券交易所:ITW每股收益增长2022年9月30日
我们认为,内部人士在过去一年进行了大量收购,这是积极的。即便如此,未来的收益对现有股东是否赚钱将重要得多。也许很值得一看我们的免费报告伊利诺伊州工具厂的收益、收入和现金流。
那股息呢?
除了衡量股价回报外,投资者还应考虑总股东回报(TSR)。虽然股价回报只反映股价的变动,但TSR包括股息的价值(假设股息再投资),以及任何折价集资或分拆所带来的利益。公平地说,TSR为支付股息的股票提供了更完整的图景。碰巧的是,伊利诺伊州工具厂最近3年的TSR为32%,超过了前面提到的股价回报率。该公司支付的股息因此提振了总计股东回报。
不同的视角
虽然亏损从来都不是好事,但伊利诺伊州Tool Works的股东们可以感到欣慰的是,包括股息在内,他们过去12个月8.8%的亏损并没有市场亏损20%左右那么糟糕。当然,长期回报要重要得多,好消息是,在过去的五年里,该股的年回报率为7%。可能该业务只是面临一些短期问题,但股东应密切关注基本面。我发现,把股价作为衡量企业业绩的长期指标是非常有趣的。但为了真正获得洞察力,我们还需要考虑其他信息。例如,考虑一下无处不在的投资风险幽灵。我们已经确定了1个警告信号与伊利诺伊州的工具工作,了解他们应该是你的投资过程的一部分。
如果你喜欢和管理层一起买股票,那么你可能会喜欢这本书免费公司名单。(提示:内部人士一直在买入这些股票)。
请注意,本文引用的市场回报反映了目前在美国交易所交易的股票的市场加权平均回报。
对这篇文章有什么反馈吗?担心内容吗? 保持联系直接与我们联系。或者,也可以给编辑组发电子邮件,地址是implywallst.com。
本文由Simply Wall St.撰写,具有概括性。我们仅使用不偏不倚的方法提供基于历史数据和分析师预测的评论,我们的文章并不打算作为财务建议。它不构成买卖任何股票的建议,也没有考虑你的目标或你的财务状况。我们的目标是为您带来由基本面数据驱动的长期重点分析。请注意,我们的分析可能不会将最新的对价格敏感的公司公告或定性材料考虑在内。Simply Wall St.对上述任何一只股票都没有持仓。