Investors in Federal Signal (NYSE:FSS) have made a splendid return of 125% over the past five years
The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on a lighter note, a good company can see its share price rise well over 100%. Long term Federal Signal Corporation (NYSE:FSS) shareholders would be well aware of this, since the stock is up 113% in five years. It's also up 18% in about a month.
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 Federal Signal
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.
Over half a decade, Federal Signal managed to grow its earnings per share at 21% a year. This EPS growth is higher than the 16% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Dive deeper into Federal Signal's key metrics by checking this interactive graph of Federal Signal's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Federal Signal's TSR for the last 5 years was 125%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Federal Signal shareholders have received a total shareholder return of 9.0% over the last year. Of course, that includes the dividend. Having said that, the five-year TSR of 18% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. If you would like to research Federal Signal in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US 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.
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