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Is Weyerhaeuser's (NYSE:WY) Share Price Gain Of 109% Well Earned?

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Simply Wall St
·4 min read
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When you buy shares in a company, there is always a risk that the price drops to zero. But if you pick the right business to buy shares in, you can make more than you can lose. Take, for example Weyerhaeuser Company (NYSE:WY). Its share price is already up an impressive 109% in the last twelve months. And in the last week the share price has popped 5.6%. The longer term returns have not been as good, with the stock price only 2.2% higher than it was three years ago.

Check out our latest analysis for Weyerhaeuser

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 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).

Weyerhaeuser went from making a loss to reporting a profit, in the last year.

When a company is just on the edge of profitability it can be well worth considering other metrics in order to more precisely gauge growth (and therefore understand share price movements).

We are skeptical of the suggestion that the 1.9% dividend yield would entice buyers to the stock. We think that the revenue growth of 15% could have some investors interested. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

earnings-and-revenue-growth
earnings-and-revenue-growth

We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. If you are thinking of buying or selling Weyerhaeuser stock, you should check out this free report showing analyst profit forecasts.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Weyerhaeuser the TSR over the last year was 111%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Weyerhaeuser shareholders have received a total shareholder return of 111% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 7% 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. It's always interesting to track share price performance over the longer term. But to understand Weyerhaeuser better, we need to consider many other factors. To that end, you should learn about the 3 warning signs we've spotted with Weyerhaeuser (including 1 which is a bit concerning) .

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.

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. 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.