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A Look At Fortive's (NYSE:FTV) Share Price Returns

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·4 min read
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Passive investing in an index fund is a good way to ensure your own returns roughly match the overall market. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. Investors in Fortive Corporation (NYSE:FTV) have tasted that bitter downside in the last year, as the share price dropped 10%. That's well below the market return of 30%. Longer term shareholders haven't suffered as badly, since the stock is down a comparatively less painful 8.0% in three years. It's up 2.3% in the last seven days.

Check out our latest analysis for Fortive

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

Even though the Fortive share price is down over the year, its EPS actually improved. Of course, the situation might betray previous over-optimism about growth.

The divergence between the EPS and the share price is quite notable, during the year. So it's easy to justify a look at some other metrics.

Given the yield is quite low, at 0.4%, we doubt the dividend can shed much light on the share price. In contrast, the 37% drop in revenue is a real concern. Many investors see falling revenue as a likely precursor to lower earnings, so this could well explain the weak share price.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
earnings-and-revenue-growth

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Fortive stock, you should check out this free report showing analyst profit forecasts.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Fortive's TSR for the last year was 7.9%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

Over the last year Fortive shareholders have received a TSR of 7.9%. Unfortunately this falls short of the market return of around 30%. On the bright side that gain is actually better than the average return of 4% over the last three years, implying that the company is doing better recently. If the business can justify the share price gain with improving fundamental data, then there could be more gains to come. 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 example, we've discovered 4 warning signs for Fortive (1 is concerning!) that you should be aware of before investing here.

Fortive is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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. 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.

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