Advertisement
U.S. markets open in 2 hours 52 minutes
  • S&P Futures

    5,306.75
    -1.50 (-0.03%)
     
  • Dow Futures

    40,146.00
    +2.00 (+0.00%)
     
  • Nasdaq Futures

    18,500.75
    -3.00 (-0.02%)
     
  • Russell 2000 Futures

    2,137.50
    -0.90 (-0.04%)
     
  • Crude Oil

    81.94
    +0.59 (+0.73%)
     
  • Gold

    2,225.20
    +12.50 (+0.56%)
     
  • Silver

    24.70
    -0.05 (-0.21%)
     
  • EUR/USD

    1.0794
    -0.0035 (-0.32%)
     
  • 10-Yr Bond

    4.1960
    0.0000 (0.00%)
     
  • Vix

    12.97
    +0.19 (+1.49%)
     
  • GBP/USD

    1.2616
    -0.0022 (-0.17%)
     
  • USD/JPY

    151.3760
    +0.1300 (+0.09%)
     
  • Bitcoin USD

    70,385.02
    +237.22 (+0.34%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,956.16
    +24.18 (+0.30%)
     
  • Nikkei 225

    40,168.07
    -594.66 (-1.46%)
     

Graham Holdings' (NYSE:GHC) underlying earnings growth outpaced the respectable return generated for shareholders over the past year

These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But if you pick the right individual stocks, you could make more than that. For example, the Graham Holdings Company (NYSE:GHC) share price is up 42% in the last 1 year, clearly besting the market return of around 34% (not including dividends). So that should have shareholders smiling. However, the longer term returns haven't been so impressive, with the stock up just 7.2% in the last three years.

In light of the stock dropping 3.0% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.

See our latest analysis for Graham Holdings

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

Graham Holdings was able to grow EPS by 228% in the last twelve months. It's fair to say that the share price gain of 42% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Graham Holdings as it was before. This could be an opportunity. This cautious sentiment is reflected in its (fairly low) P/E ratio of 5.56.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

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

We know that Graham Holdings has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

A Different Perspective

We're pleased to report that Graham Holdings shareholders have received a total shareholder return of 44% over one year. That's including the dividend. That's better than the annualised return of 5% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Graham Holdings better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Graham Holdings you should be aware of.

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.

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.

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

Advertisement