Those who invested in Jacobs Solutions (NYSE:J) five years ago are up 95%
It hasn't been the best quarter for Jacobs Solutions Inc. (NYSE:J) shareholders, since the share price has fallen 12% in that time. Looking further back, the stock has generated good profits over five years. After all, the share price is up a market-beating 87% in that time. While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 18% drop, in the last year.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
See our latest analysis for Jacobs Solutions
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Jacobs Solutions managed to grow its earnings per share at 14% a year. That makes the EPS growth particularly close to the yearly share price growth of 13%. This indicates that investor sentiment towards the company has not changed a great deal. Indeed, it would appear the share price is reacting to the EPS.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how Jacobs Solutions has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Jacobs Solutions, it has a TSR of 95% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
While it's never nice to take a loss, Jacobs Solutions shareholders can take comfort that , including dividends,their trailing twelve month loss of 17% wasn't as bad as the market loss of around 25%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 14% for each year. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. It's always interesting to track share price performance over the longer term. But to understand Jacobs Solutions better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Jacobs Solutions you should know about.
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.
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.
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