The most you can lose on any stock (assuming you don't use leverage) is 100% of your money.  But on the bright side, you can make far more than 100% on a really good stock.  One great example is Thermo Fisher Scientific Inc. (NYSE:TMO) which saw its share price drive 127% higher over five years.    Also pleasing for shareholders was the 21% gain in the last three months.    But this could be related to the strong market, which is up 13% in the last three months.      

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.  

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...'  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.

During five years of share price growth, Thermo Fisher Scientific achieved compound earnings per share (EPS) growth of 16% per year.    This EPS growth is reasonably close to the 18% average annual increase in the share price.   Therefore one could conclude that sentiment towards the shares hasn't morphed very much.  Rather, the share price has approximately tracked EPS growth.  

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

NYSE:TMO Earnings Per Share Growth February 3rd 2024

It might be well worthwhile taking a look at our free report on Thermo Fisher Scientific's earnings, revenue and cash flow.

What About Dividends?

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.  We note that for Thermo Fisher Scientific the TSR over the last 5 years was 129%, which is better than the share price return mentioned above.  This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 19% in the last year, Thermo Fisher Scientific shareholders lost 5.9% (even including dividends).  Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested.     On the bright side, long term shareholders have made money, with a gain of 18% per year over half a decade.  It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend.        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.