Rush Enterprises' (NASDAQ:RUSH.B) five-year earnings growth trails the strong shareholder returns
When you buy a stock there is always a possibility that it could drop 100%. But on a lighter note, a good company can see its share price rise well over 100%. Long term Rush Enterprises, Inc. (NASDAQ:RUSH.B) shareholders would be well aware of this, since the stock is up 123% in five years. Meanwhile the share price is 4.2% higher than it was a week ago.
Since the stock has added US$115m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
See our latest analysis for Rush Enterprises
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During five years of share price growth, Rush Enterprises achieved compound earnings per share (EPS) growth of 43% per year. The EPS growth is more impressive than the yearly share price gain of 17% over the same period. So it seems the market isn't so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 9.90.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Rush Enterprises has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
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 is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Rush Enterprises the TSR over the last 5 years was 136%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Rush Enterprises has rewarded shareholders with a total shareholder return of 26% in the last twelve months. That's including the dividend. That's better than the annualised return of 19% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 2 warning signs for Rush Enterprises (of which 1 is potentially serious!) you should know about.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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.
