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.
購買低成本指數基金將為你帶來平均市場回報。但從整體來看,有大量股票表現遜於大盤。這就是發生在伊利諾伊機械。(紐約證券交易所代碼:ITW)股價。它在三年內上漲了23%,但這低於市場回報率。不幸的是,該公司股價在12個月內下跌了11%。
考慮到這一點,值得關注的是,該公司的潛在基本面是長期業績的驅動力,還是存在一些差異。
查看我們對伊利諾伊州工具廠的最新分析
在他的文章中格雷厄姆和多德斯維爾的超級投資者沃倫·巴菲特描述了股價並不總是理性地反映一家企業的價值。考察市場情緒如何隨時間變化的一種方法是觀察一家公司的股價和每股收益(EPS)之間的相互作用。
在三年的股價增長中,伊利諾伊州工具廠實現了每股複合收益每年4.5%的增長。相比之下,股價每年7%的漲幅超過了每股收益的增長。這表明,在經歷了過去幾年的上漲後,市場對該股的看法變得更加樂觀。考慮到三年來盈利增長的記錄,這並不一定令人驚訝。
您可以在下圖中看到EPS是如何隨着時間的推移而變化的(單擊圖表可查看精確值)。
紐約證券交易所:ITW每股收益增長2022年9月30日
我們認為,內部人士在過去一年進行了大量收購,這是積極的。即便如此,未來的收益對現有股東是否賺錢將重要得多。也許很值得一看我們的免費報告伊利諾伊州工具廠的收益、收入和現金流。
那股息呢?
除了衡量股價回報外,投資者還應考慮總股東回報(TSR)。雖然股價回報只反映股價的變動,但TSR包括股息的價值(假設股息再投資),以及任何折價集資或分拆所帶來的利益。公平地説,TSR為支付股息的股票提供了更完整的圖景。碰巧的是,伊利諾伊州工具廠最近3年的TSR為32%,超過了前面提到的股價回報率。該公司支付的股息因此提振了總計股東回報。
不同的視角
雖然虧損從來都不是好事,但伊利諾伊州Tool Works的股東們可以感到欣慰的是,包括股息在內,他們過去12個月8.8%的虧損並沒有市場虧損20%左右那麼糟糕。當然,長期回報要重要得多,好消息是,在過去的五年裏,該股的年回報率為7%。可能該業務只是面臨一些短期問題,但股東應密切關注基本面。我發現,把股價作為衡量企業業績的長期指標是非常有趣的。但為了真正獲得洞察力,我們還需要考慮其他信息。例如,考慮一下無處不在的投資風險幽靈。我們已經確定了1個警告信號與伊利諾伊州的工具工作,瞭解他們應該是你的投資過程的一部分。
如果你喜歡和管理層一起買股票,那麼你可能會喜歡這本書免費公司名單。(提示:內部人士一直在買入這些股票)。
請注意,本文引用的市場回報反映了目前在美國交易所交易的股票的市場加權平均回報。
對這篇文章有什麼反饋嗎?擔心內容嗎? 保持聯繫直接與我們聯繫。或者,也可以給編輯組發電子郵件,地址是implywallst.com。
本文由Simply Wall St.撰寫,具有概括性。我們僅使用不偏不倚的方法提供基於歷史數據和分析師預測的評論,我們的文章並不打算作為財務建議。它不構成買賣任何股票的建議,也沒有考慮你的目標或你的財務狀況。我們的目標是為您帶來由基本面數據驅動的長期重點分析。請注意,我們的分析可能不會將最新的對價格敏感的公司公告或定性材料考慮在內。Simply Wall St.對上述任何一隻股票都沒有持倉。