U.S. Markets open in 6 hrs 41 mins
  • S&P Futures

    3,680.50
    -28.50 (-0.77%)
     
  • Dow Futures

    29,483.00
    -186.00 (-0.63%)
     
  • Nasdaq Futures

    11,283.00
    -93.75 (-0.82%)
     
  • Russell 2000 Futures

    1,671.90
    -14.20 (-0.84%)
     
  • Crude Oil

    77.52
    -1.22 (-1.55%)
     
  • Gold

    1,643.70
    -11.90 (-0.72%)
     
  • Silver

    18.55
    -0.36 (-1.90%)
     
  • EUR/USD

    0.9648
    -0.0040 (-0.4149%)
     
  • 10-Yr Bond

    3.6970
    0.0000 (0.00%)
     
  • Vix

    29.92
    +2.57 (+9.40%)
     
  • GBP/USD

    1.0625
    -0.0232 (-2.1345%)
     
  • USD/JPY

    143.7890
    +0.4690 (+0.3272%)
     
  • BTC-USD

    18,726.32
    -301.82 (-1.59%)
     
  • CMC Crypto 200

    428.89
    -15.65 (-3.52%)
     
  • FTSE 100

    7,018.60
    -140.92 (-1.97%)
     
  • Nikkei 225

    26,431.55
    -722.28 (-2.66%)
     

Stryker's (NYSE:SYK) 9.1% CAGR outpaced the company's earnings growth over the same five-year period

·3 min read

It hasn't been the best quarter for Stryker Corporation (NYSE:SYK) shareholders, since the share price has fallen 16% in that time. But the silver lining is the stock is up over five years. In that time, it is up 46%, which isn't bad, but is below the market return of 75%. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 21% decline over the last twelve months.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

View our latest analysis for Stryker

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. 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.

Over half a decade, Stryker managed to grow its earnings per share at 3.9% a year. This EPS growth is lower than the 8% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

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

This free interactive report on Stryker's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Stryker's TSR for the last 5 years was 54%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We regret to report that Stryker shareholders are down 20% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 14%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 9%, 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. 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. For instance, we've identified 2 warning signs for Stryker (1 shouldn't be ignored) that you should be aware of.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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