Despite the downward trend in earnings at Valvoline (NYSE:VVV) the stock lifts 4.0%, bringing three-year gains to 90%
By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the Valvoline Inc. (NYSE:VVV) share price is up 82% in the last three years, clearly besting the market return of around 33% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 28% in the last year , including dividends .
Since it's been a strong week for Valvoline shareholders, let's have a look at trend of the longer term fundamentals.
See our latest analysis for Valvoline
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...' 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 the last three years, Valvoline failed to grow earnings per share, which fell 18% (annualized).
This means it's unlikely the market is judging the company based on earnings growth. Given this situation, it makes sense to look at other metrics too.
You can only imagine how long term shareholders feel about the declining revenue trend (slipping at 33% per year). The only thing that's clear is there is low correlation between Valvoline's share price and its historic fundamental data. Further research may be required!
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that Valvoline has improved its bottom line lately, but what does the future have in store? So we recommend checking out this free report showing consensus forecasts
What About The Total Shareholder Return (TSR)?
We've already covered Valvoline's share price action, but we should also mention its total shareholder return (TSR). Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Valvoline's TSR of 90% for the 3 years exceeded its share price return, because it has paid dividends.
A Different Perspective
We're pleased to report that Valvoline shareholders have received a total shareholder return of 28% over one year. That's better than the annualised return of 13% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. For example, we've discovered 2 warning signs for Valvoline (1 is potentially serious!) that you should be aware of before investing here.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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.
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