U.S. markets open in 5 hours 10 minutes
  • S&P Futures

    4,156.75
    -34.75 (-0.83%)
     
  • Dow Futures

    34,009.00
    -88.00 (-0.26%)
     
  • Nasdaq Futures

    12,611.50
    -235.25 (-1.83%)
     
  • Russell 2000 Futures

    2,005.40
    -2.50 (-0.12%)
     
  • Crude Oil

    75.86
    -0.02 (-0.03%)
     
  • Gold

    1,925.50
    -5.30 (-0.27%)
     
  • Silver

    23.48
    -0.14 (-0.57%)
     
  • EUR/USD

    1.0917
    +0.0006 (+0.05%)
     
  • 10-Yr Bond

    3.3960
    0.0000 (0.00%)
     
  • Vix

    18.57
    +0.70 (+3.92%)
     
  • GBP/USD

    1.2209
    -0.0020 (-0.16%)
     
  • USD/JPY

    128.6290
    +0.0250 (+0.02%)
     
  • BTC-USD

    23,447.73
    -328.79 (-1.38%)
     
  • CMC Crypto 200

    535.18
    -10.13 (-1.86%)
     
  • FTSE 100

    7,825.91
    +5.75 (+0.07%)
     
  • Nikkei 225

    27,509.46
    +107.41 (+0.39%)
     

Investors in Ford Motor (NYSE:F) have made a favorable return of 57% over the past three years

Ford Motor Company (NYSE:F) shareholders might be concerned after seeing the share price drop 11% in the last quarter. But over three years, the returns would have left most investors smiling In the last three years the share price is up, 49%: better than the market.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Ford Motor

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 three years of share price growth, Ford Motor achieved compound earnings per share growth of 77% per year. This EPS growth is higher than the 14% average annual increase in the share price. So it seems investors have become more cautious about the company, over time. This cautious sentiment is reflected in its (fairly low) P/E ratio of 5.97.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

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

It is of course excellent to see how Ford Motor has grown profits over the years, but the future is more important for shareholders. This free interactive report on Ford Motor's balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Ford Motor, it has a TSR of 57% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

We regret to report that Ford Motor shareholders are down 28% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 16%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 5% per year over half a decade. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 2 warning signs for Ford Motor (1 doesn't sit too well with us) that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here