While it may not be enough for some shareholders, we think it is good to see the The Greenbrier Companies, Inc. (NYSE:GBX) share price up 15% in a single quarter. But that doesn't change the fact that the returns over the last year have been less than pleasing. The cold reality is that the stock has dropped 38% in one year, under-performing the market.
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. 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.
Unhappily, Greenbrier Companies had to report a 56% decline in EPS over the last year. This fall in the EPS is significantly worse than the 38% the share price fall. It may have been that the weak EPS was not as bad as some had feared.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Greenbrier Companies's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We've already covered Greenbrier Companies's share price action, but we should also mention its total shareholder return (TSR). The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for Greenbrier Companies shareholders, and that cash payout explains why its total shareholder loss of 36%, over the last year, isn't as bad as the share price return.
A Different Perspective
Investors in Greenbrier Companies had a tough year, with a total loss of 36% (including dividends) , against a market gain of about 17%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 6.8% per year over five years. We realise that Buffett has said investors should 'buy when there is blood on the streets', but we caution that investors should first be sure they are buying a high quality businesses. If you would like to research Greenbrier Companies in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
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.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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