Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Jabil Inc. (NYSE:JBL) share price is up 87% in the last 5 years, clearly besting the market return of around 46% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 58% , including dividends .
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
During the last half decade, Jabil became profitable. That would generally be considered a positive, so we'd expect the share price to be up. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. Indeed, the Jabil share price has gained 78% in three years. Meanwhile, EPS is up 11% per year. This EPS growth is lower than the 21% average annual increase in the share price over three years. So it's fair to assume the market has a higher opinion of the business than it did three years ago.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Jabil has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
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. We note that for Jabil the TSR over the last 5 years was 99%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's good to see that Jabil has rewarded shareholders with a total shareholder return of 58% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 15% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. If you would like to research Jabil in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
We will like Jabil better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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.
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