Balchem's (NASDAQ:BCPC) five-year earnings growth trails the 15% YoY shareholder returns
If you want to compound wealth in the stock market, you can do so by buying an index fund. But in our experience, buying the right stocks can give your wealth a significant boost. For example, the Balchem Corporation (NASDAQ:BCPC) share price is 97% higher than it was five years ago, which is more than the market average. It's also good to see a healthy gain of 22% in the last year.
Since the stock has added US$160m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
View our latest analysis for Balchem
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Over half a decade, Balchem managed to grow its earnings per share at 0.5% a year. This EPS growth is lower than the 15% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth. This optimism is visible in its fairly high P/E ratio of 46.93.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Balchem's key metrics by checking this interactive graph of Balchem's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Balchem's TSR for the last 5 years was 102%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Balchem provided a TSR of 23% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 15% over half a decade It is possible that returns will improve along with the business fundamentals. Before spending more time on Balchem it might be wise to click here to see if insiders have been buying or selling shares.
Of course Balchem 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 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.
