For many investors, the main point of stock picking is to generate higher returns than the overall market. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term John Bean Technologies Corporation (NYSE:JBT) shareholders have had that experience, with the share price dropping 25% in three years, versus a market return of about 22%.
While the last three years has been tough for John Bean Technologies shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Although the share price is down over three years, John Bean Technologies actually managed to grow EPS by 6.2% per year in that time. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.
Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
With a rather small yield of just 0.4% we doubt that the stock's share price is based on its dividend. We note that, in three years, revenue has actually grown at a 6.9% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating John Bean Technologies further; while we may be missing something on this analysis, there might also be an opportunity.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We know that John Bean Technologies has improved its bottom line lately, but what does the future have in store? You can see what analysts are predicting for John Bean Technologies in this interactive graph of future profit estimates.
A Different Perspective
John Bean Technologies shareholders are down 3.0% for the year (even including dividends), but the market itself is up 28%. 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 1.8% 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. Before forming an opinion on John Bean Technologies you might want to consider these 3 valuation metrics.
If you are like me, then you will not want to miss this free list of growing companies 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.
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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.