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Investing in Methode Electronics (NYSE:MEI) three years ago would have delivered you a 53% gain

Methode Electronics, Inc. (NYSE:MEI) shareholders might be concerned after seeing the share price drop 13% in the last quarter. But at least the stock is up over the last three years. Arguably you'd have been better off buying an index fund, because the gain of 47% in three years isn't amazing.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

See our latest analysis for Methode Electronics

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 three years of share price growth, Methode Electronics achieved compound earnings per share growth of 3.8% per year. In comparison, the 14% per year gain in the share price outpaces the EPS growth. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It's not unusual to see the market 're-rate' a stock, after a few years of growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
earnings-per-share-growth

It might be well worthwhile taking a look at our free report on Methode Electronics' earnings, revenue and cash flow.

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 and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Methode Electronics the TSR over the last 3 years was 53%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Methode Electronics shareholders are up 3.2% for the year (even including dividends). But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 0.2% per year, over five years. So this might be a sign the business has turned its fortunes around. If you would like to research Methode Electronics in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.

Of course Methode Electronics 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.