For many, the main point of investing is to generate higher returns than the overall market. But in any portfolio, there will be mixed results between individual stocks. So we wouldn’t blame long term The Buckle, Inc. (NYSE:BKE) shareholders for doubting their decision to hold, with the stock down 62% over a half decade. Unhappily, the share price slid 4.6% in the last week.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).
During the five years over which the share price declined, Buckle’s earnings per share (EPS) dropped by 10% each year. This reduction in EPS is less than the 18% annual reduction in the share price. So it seems the market was too confident about the business, in the past. The less favorable sentiment is reflected in its current P/E ratio of 8.92.
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 Buckle’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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 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 Buckle the TSR over the last 5 years was -42%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Investors in Buckle had a tough year, with a total loss of 0.6% (including dividends), against a market gain of about 3.9%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Unfortunately, longer term shareholders are suffering worse, given the loss of 10% doled out over the last five years. We’d need to see some sustained improvements in the key metrics before we could muster much enthusiasm. If you would like to research Buckle in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
But note: Buckle 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 firstname.lastname@example.org. 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.