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AGCO's (NYSE:AGCO) 19% CAGR outpaced the company's earnings growth over the same five-year period

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The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For example, the AGCO Corporation (NYSE:AGCO) share price has soared 122% in the last half decade. Most would be very happy with that. On top of that, the share price is up 16% in about a quarter. The company reported its financial results recently; you can catch up on the latest numbers by reading our company report.

Since it's been a strong week for AGCO shareholders, let's have a look at trend of the longer term fundamentals.

See our latest analysis for AGCO

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.

Over half a decade, AGCO managed to grow its earnings per share at 44% a year. This EPS growth is higher than the 17% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 10.90.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

earnings-per-share-growth
earnings-per-share-growth

It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

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 AGCO the TSR over the last 5 years was 137%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

AGCO shareholders have received returns of 7.7% over twelve months (even including dividends), which isn't far from the general market return. It has to be noted that the recent return falls short of the 19% shareholders have gained each year, over half a decade. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes AGCO a stock worth watching. It's always interesting to track share price performance over the longer term. But to understand AGCO better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for AGCO you should know about.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.