The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100%. Long term Parker-Hannifin Corporation (NYSE:PH) shareholders would be well aware of this, since the stock is up 142% in five years. In the last week the share price is up 2.6%.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Parker-Hannifin
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, Parker-Hannifin managed to grow its earnings per share at 15% a year. This EPS growth is slower than the share price growth of 19% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Parker-Hannifin has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Parker-Hannifin will grow revenue in the future.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Parker-Hannifin's TSR for the last 5 years was 163%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that Parker-Hannifin shareholders have received a total shareholder return of 59% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 21% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Parker-Hannifin is showing 2 warning signs in our investment analysis , you should know about...
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Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.