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Did CNH Industrial's (NYSE:CNHI) Share Price Deserve to Gain 57%?

Simply Wall St

One simple way to benefit from the stock market is to buy an index fund. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, the CNH Industrial N.V. (NYSE:CNHI) share price is up 57% in the last three years, clearly besting than the market return of around 37% (not including dividends).

Check out our latest analysis for CNH Industrial

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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, CNH Industrial moved from a loss to profitability. So we would expect a higher share price over the period.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

NYSE:CNHI Past and Future Earnings, September 17th 2019

It is of course excellent to see how CNH Industrial has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at CNH Industrial's financial health with this free report on its balance sheet.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, CNH Industrial's TSR for the last 3 years was 64%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

CNH Industrial shareholders are down 5.9% for the year (even including dividends), but the market itself is up 4.4%. 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 9.6%, 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. Before forming an opinion on CNH Industrial you might want to consider these 3 valuation metrics.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.