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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. On the other hand, if you find a high quality business to buy (at the right price) you can more than double your money! For example, the Fortune Brands Home & Security, Inc. (NYSE:FBHS) share price has soared 122% return in just a single year. On top of that, the share price is up 17% in about a quarter. But this could be related to the strong market, which is up 8.9% in the last three months. It is also impressive that the stock is up 81% over three years, adding to the sense that it is a real winner.
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 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.
Fortune Brands Home & Security was able to grow EPS by 29% in the last twelve months. This EPS growth is significantly lower than the 122% increase in the share price. This indicates that the market is now more optimistic about the stock.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that Fortune Brands Home & Security 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?
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. We note that for Fortune Brands Home & Security the TSR over the last year was 124%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Fortune Brands Home & Security shareholders have received a total shareholder return of 124% over the last year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 14%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 2 warning signs for Fortune Brands Home & Security that you should be aware of.
We will like Fortune Brands Home & Security 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.
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.
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