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 Wolverine World Wide, Inc. (NYSE:WWW) share price is up 75% in the last five years, that’s less than the market return. Zooming in, the stock is actually down 8.6% in the last year.
Check out our latest analysis for Wolverine World Wide
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, Wolverine World Wide actually saw its EPS drop 20% per year.
This means it’s unlikely the market is judging the company based on earnings growth. 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.
The modest 1.3% dividend yield is unlikely to be propping up the share price. It is not great to see that revenue has dropped by 5.8% per year over five years. It certainly surprises us that the share price is up, but perhaps a closer examination of the data will yield answers.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Wolverine World Wide is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Wolverine World Wide the TSR over the last 5 years was 86%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Investors in Wolverine World Wide had a tough year, with a total loss of 7.0% (including dividends), against a market gain of about 27%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn’t be so upset, since they would have made 13%, 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. 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. Even so, be aware that Wolverine World Wide is showing 4 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable…
Of course Wolverine World Wide may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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. 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.
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