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Did Valmont Industries' (NYSE:VMI) Share Price Deserve to Gain 34%?

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Simply Wall St
·3 min read
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If you buy and hold a stock for many years, you'd hope to be making a profit. Better yet, you'd like to see the share price move up more than the market average. But Valmont Industries, Inc. (NYSE:VMI) has fallen short of that second goal, with a share price rise of 34% over five years, which is below the market return. Over the last twelve months the stock price has risen a very respectable 11%.

See our latest analysis for Valmont Industries

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

Over half a decade, Valmont Industries managed to grow its earnings per share at 7.6% a year. This EPS growth is higher than the 6% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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

We know that Valmont Industries has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Valmont Industries will grow revenue in the future.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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, Valmont Industries' TSR for the last 5 years was 42%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Valmont Industries shareholders are up 12% for the year (even including dividends). 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 7% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. It's always interesting to track share price performance over the longer term. But to understand Valmont Industries better, we need to consider many other factors. For instance, we've identified 2 warning signs for Valmont Industries that you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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

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. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.