Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the Neogen share price has climbed 88% in five years, easily topping the market return of 49% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 27% in the last year.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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 five years of share price growth, Neogen achieved compound earnings per share (EPS) growth of 14% per year. This EPS growth is remarkably close to the 13% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Indeed, it would appear the share price is reacting to the EPS.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of Neogen's earnings, revenue and cash flow.
A Different Perspective
Neogen provided a TSR of 27% over the last twelve months. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 13% over half a decade It is possible that returns will improve along with the business fundamentals. Before spending more time on Neogen it might be wise to click here to see if insiders have been buying or selling shares.
Of course Neogen 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.
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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