Low-cost index funds make it easy to achieve average market performance. But across the board there are many stocks that underperform the market. That’s what happened with the Amcor plc (NYSE: AMCR) the stock price. It is 11% more than three years, but this is below the return of the market. Zooming in, the stock is actually down 1.9% in the last year.
So let’s evaluate the underlying fundamentals over the past 3 years and see if they have moved in lockstep with shareholder returns.
There is no denying that markets are sometimes efficient, but prices do not always reflect the performance of the underlying business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investors’ attitudes to a company have changed over time.
Amcor has been able to grow its EPS by 22% annually over three years, sending the stock price higher. Average annual stock price growth of 4% is actually lower than EPS growth. So one could reasonably conclude that the market has cooled on the stock.
The image below shows how EPS has tracked over time (if you click on the image you can see more detail).
This free interactive report on Amcor’s earnings, revenue and cash flow It’s a great place to start if you want to investigate the stock further.
In terms of measuring stock price return, investors should also consider total shareholder return (TSR). The TSR incorporates the value of any spin-off or capital increase discounted, along with any dividends, based on the assumption that the dividends are reinvested. It is fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Amcor, it has a TSR of 26% for the last 3 years. That exceeds its share price performance that we mentioned earlier. And no prizes for guessing that dividend payments largely explain the divergence!
A different perspective
It is good to see that Amcor shareholders have gained 2.0% (in total) in the last year. That includes the value of the dividend. But the three-year TSR of 8% per annum is even better. It is always interesting to track long-term stock price performance. But to better understand Amcor, we need to consider several other factors. Like the risks, for example. Every company has them, and we’ve seen them 3 warning signs for Amcor (of which 1 is potentially serious!) You should know.
For those who like to find winning investments this free list of growing companies with recent insider buyouts, could be just the ticket.
Please note, the market returns quoted in this article reflect the weighted average market returns of stocks currently trading on US exchanges.
Valuation is complex, but we help simplify it.
Find out if Amcor is potentially over or underrated by checking our comprehensive analysis, which includes fair value estimation, risks and warnings, dividends, insider transactions and financial health.
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This Simply Wall St article 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 into account your goals, or your financial situation. We aim to deliver focused long-term analysis driven by fundamental data. Note that our analysis can not factor in the latest announcements of companies sensitive to price or quality material. Simply Wall St has no position in any of the stocks mentioned.