Teleflex's (NYSE:TFX) five-year earnings growth trails the solid shareholder returns
When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. Long term Teleflex Incorporated (NYSE:TFX) shareholders would be well aware of this, since the stock is up 110% in five years. Better yet, the share price has risen 3.6% in the last week. But this could be related to the buoyant market which is up about 2.6% in a week.
The past week has proven to be lucrative for Teleflex investors, so let's see if fundamentals drove the company's five-year performance.
See our latest analysis for Teleflex
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
During five years of share price growth, Teleflex achieved compound earnings per share (EPS) growth of 3.9% per year. This EPS growth is lower than the 16% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 51.14.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on Teleflex's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. As it happens, Teleflex's TSR for the last 5 years was 116%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Teleflex shareholders gained a total return of 2.9% during the year. But that was short of the market average. On the bright side, the longer term returns (running at about 17% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. It's always interesting to track share price performance over the longer term. But to understand Teleflex better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with Teleflex .
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.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
