The Greenbrier Companies, Inc. (NYSE:GBX) shareholders might be concerned after seeing the share price drop 16% in the last quarter. But that doesn’t change the fact that the returns over the last three years have been respectable. After all, the stock has performed better than the market (49%) over that time, over which it gained 56%.
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 the last three years, Greenbrier Companies failed to grow earnings per share, which fell 17% (annualized). This means it’s unlikely the market is judging the company based on earnings growth. Therefore, we think it’s worth considering other metrics as well.
The revenue drop of 6.9% is as underwhelming as some politicians. What’s clear is that historic earnings and revenue aren’t matching up with the share price action, very well. So you might have to dig deeper to get a grasp of the situation
The chart below shows how revenue and earnings have changed with time, (if you click on the chart you can see the actual values).
Greenbrier Companies is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Greenbrier Companies stock, you should check out this free report showing analyst consensus estimates for future profits.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Greenbrier Companies the TSR over the last 3 years was 66%, 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
Greenbrier Companies shareholders are down 17% for the year (even including dividends), but the market itself is up 5.0%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 0.5% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. Before spending more time on Greenbrier Companies it might be wise to click here to see if insiders have been buying or selling shares.
Of course Greenbrier Companies may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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 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. Thank you for reading.