The past year for Sturm Ruger (NYSE:RGR) investors has not been profitable
The simplest way to benefit from a rising market is to buy an index fund. While individual stocks can be big winners, plenty more fail to generate satisfactory returns. That downside risk was realized by Sturm, Ruger & Company, Inc. (NYSE:RGR) shareholders over the last year, as the share price declined 15%. That's well below the market return of 6.9%. At least the damage isn't so bad if you look at the last three years, since the stock is down 9.9% in that time.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Sturm Ruger
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Unhappily, Sturm Ruger had to report a 51% decline in EPS over the last year. This fall in the EPS is significantly worse than the 15% the share price fall. It may have been that the weak EPS was not as bad as some had feared.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Sturm Ruger's key metrics by checking this interactive graph of Sturm Ruger's earnings, revenue and cash flow.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Sturm Ruger the TSR over the last 1 year was -4.8%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Sturm Ruger shareholders are down 4.8% for the year (even including dividends), but the market itself is up 6.9%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 3%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Sturm Ruger better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with Sturm Ruger .
But note: Sturm Ruger 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 American 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
