Ternium (NYSE:TX) shareholders have earned a 48% CAGR over the last three years
The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But in contrast you can make much more than 100% if the company does well. For example, the Ternium S.A. (NYSE:TX) share price has soared 171% in the last three years. Most would be happy with that. We note the stock price is up 1.5% in the last seven days.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for Ternium
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Ternium was able to grow its EPS at 60% per year over three years, sending the share price higher. This EPS growth is higher than the 39% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 5.77.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Ternium has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. In the case of Ternium, it has a TSR of 226% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Ternium has rewarded shareholders with a total shareholder return of 27% in the last twelve months. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 8% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Even so, be aware that Ternium is showing 3 warning signs in our investment analysis , and 1 of those can't be ignored...
But note: Ternium 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.
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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.
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