Investing in Gorman-Rupp (NYSE:GRC) a year ago would have delivered you a 17% gain
It's always best to build a diverse portfolio of shares, since any stock business could lag the broader market. Of course, the aim of the game is to pick stocks that do better than an index fund. One such company is The Gorman-Rupp Company (NYSE:GRC), which saw its share price increase 14% in the last year, slightly above the market return of around 12% (not including dividends). Unfortunately the longer term returns are not so good, with the stock falling 8.0% in the last three years.
So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.
See our latest analysis for Gorman-Rupp
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the last year Gorman-Rupp grew its earnings per share (EPS) by 85%. This EPS growth is significantly higher than the 14% increase in the share price. Therefore, it seems the market isn't as excited about Gorman-Rupp as it was before. This could be an opportunity.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It's probably worth noting that the CEO is paid less than the median at similar sized 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. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Gorman-Rupp's TSR for the last 1 year was 17%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that Gorman-Rupp shareholders have received a total shareholder return of 17% over the last year. That's including the dividend. That's better than the annualised return of 1.0% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Gorman-Rupp better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Gorman-Rupp .
Of course Gorman-Rupp 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 American exchanges.
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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.
