The 30% return delivered to Lindsay's (NYSE:LNN) shareholders actually lagged YoY earnings growth
While Lindsay Corporation (NYSE:LNN) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 15% in the last quarter. On the other hand the share price is higher than it was three years ago. Arguably you'd have been better off buying an index fund, because the gain of 27% in three years isn't amazing.
The past week has proven to be lucrative for Lindsay investors, so let's see if fundamentals drove the company's three-year performance.
Check out our latest analysis for Lindsay
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During three years of share price growth, Lindsay achieved compound earnings per share growth of 62% per year. The average annual share price increase of 8% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It is of course excellent to see how Lindsay has grown profits over the years, but the future is more important for shareholders. This free interactive report on Lindsay's balance sheet strength is a great place to start, if you want to investigate the stock further.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Lindsay, it has a TSR of 30% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Lindsay shareholders are down 5.0% for the year (even including dividends), but the market itself is up 3.1%. 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 6%, 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. Is Lindsay cheap compared to other companies? These 3 valuation measures might help you decide.
We will like Lindsay 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 American exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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