Stryker's (NYSE:SYK) investors will be pleased with their notable 54% return over the last five years
If you buy and hold a stock for many years, you'd hope to be making a profit. Furthermore, you'd generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the Stryker Corporation (NYSE:SYK) share price is up 46% in the last five years, that's less than the market return. Zooming in, the stock is actually down 1.8% in the last year.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
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.
Over half a decade, Stryker managed to grow its earnings per share at 10% a year. The EPS growth is more impressive than the yearly share price gain of 8% over the same period. So one could conclude that the broader market has become more cautious towards the stock.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Dive deeper into Stryker's key metrics by checking this interactive graph of Stryker's earnings, revenue and cash flow.
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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Stryker's TSR for the last 5 years was 54%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Investors in Stryker had a tough year, with a total loss of 0.9% (including dividends), against a market gain of about 18%. 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 9%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Stryker better, we need to consider many other factors. For instance, we've identified 3 warning signs for Stryker that you should be aware of.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).
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.