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The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. But Snap-on Incorporated (NYSE:SNA) has fallen short of that second goal, with a share price rise of 38% over five years, which is below the market return. Zooming in, the stock is up just 3.1% in the last year.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Over half a decade, Snap-on managed to grow its earnings per share at 15% a year. The EPS growth is more impressive than the yearly share price gain of 6.6% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Snap-on has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Snap-on will grow revenue in the future.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. As it happens, Snap-on's TSR for the last 5 years was 50%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Snap-on shareholders gained a total return of 5.4% during the year. But that return falls short of the market. If we look back over five years, the returns are even better, coming in at 8.5% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. If you would like to research Snap-on in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.