Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the Murphy USA share price has climbed 60% in five years, easily topping the market return of 49% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 7.7%.
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, Murphy USA managed to grow its earnings per share at 11% a year. This EPS growth is reasonably close to the 9.9% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Murphy USA's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
Murphy USA shareholders are up 7.7% for the year. But that return falls short of the market. On the bright side, the longer term returns (running at about 9.9% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. Before spending more time on Murphy USA it might be wise to click here to see if insiders have been buying or selling shares.
But note: Murphy USA may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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 email@example.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.