The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. But Werner Enterprises, Inc. (NASDAQ:WERN) has fallen short of that second goal, with a share price rise of 61% over five years, which is below the market return. Zooming in, the stock is actually down 4.2% in the last year.
So let’s assess the underlying fundamentals over the last 5 years and see if they’ve moved in lock-step with shareholder returns.
Check out our latest analysis for Werner Enterprises
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
During five years of share price growth, Werner Enterprises achieved compound earnings per share (EPS) growth of 29% per year. This EPS growth is higher than the 10% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. This cautious sentiment is reflected in its (fairly low) P/E ratio of 11.11.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Werner Enterprises has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Werner Enterprises the TSR over the last 5 years was 90%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Werner Enterprises shareholders are down 3.3% for the year (even including dividends), but the market itself is up 2.3%. 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. Longer term investors wouldn’t be so upset, since they would have made 14%, each year, over five years. 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. 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. Take risks, for example – Werner Enterprises has 1 warning sign we think you should be aware of.
We will like Werner Enterprises better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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.