When you buy shares in a company, it’s worth keeping in mind the possibility that it could fail, and you could lose your money. 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 Texas Instruments Incorporated (NASDAQ:TXN) shareholders would be well aware of this, since the stock is up 135% in five years. Also pleasing for shareholders was the 17% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 10% in 90 days).
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
Over half a decade, Texas Instruments managed to grow its earnings per share at 24% a year. The EPS growth is more impressive than the yearly share price gain of 19% over the same period. So one could conclude that the broader market has become more cautious towards the stock.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. This free interactive report on Texas Instruments’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 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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Texas Instruments’s TSR for the last 5 years was 168%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Texas Instruments’s TSR for the year was broadly in line with the market average, at 3.5%. It has to be noted that the recent return falls short of the 22% shareholders have gained each year, over half a decade. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Texas Instruments a stock worth watching. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Texas Instruments by clicking this link.
Texas Instruments is not the only stock that insiders are buying. 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.
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.