Investors can buy low cost index fund if they want to receive the average market return. But in any diversified portfolio of stocks, you'll see some that fall short of the average. That's what has happened with the Kirby Corporation (NYSE:KEX) share price. It's up 21% over three years, but that is below the market return. In the last year the stock has gained 14%.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the three years of share price growth, Kirby actually saw its earnings per share (EPS) drop 13% per year.
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.
It may well be that Kirby revenue growth rate of 21% over three years has convinced shareholders to believe in a brighter future. In that case, the company may be sacrificing current earnings per share to drive growth, and maybe shareholder's faith in better days ahead will be rewarded.
The company's revenue and earnings (over time) are 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. So we recommend checking out this free report showing consensus forecasts
A Different Perspective
Kirby shareholders are up 14% for the year. But that return falls short of the market. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 0.7% endured over half a decade. So this might be a sign the business has turned its fortunes around. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
But note: Kirby 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.
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.
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. Thank you for reading.