Yahoo Finance Even though Dow (NYSE:DOW) has lost US$1.8b market cap in last 7 days, shareholders are still up 67% over 3 years
It hasn't been the best quarter for Dow Inc. (NYSE:DOW) shareholders, since the share price has fallen 15% in that time. But we wouldn't complain about the gain over the last three years. In fact the stock is up 43%, which is better than the market return of 43%.
Since the long term performance has been good but there's been a recent pullback of 4.9%, let's check if the fundamentals match the share price.
See our latest analysis for Dow
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Dow became profitable within the last three years. So we would expect a higher share price over the period.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Dow has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Dow stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Dow's TSR for the last 3 years was 67%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
The last twelve months weren't great for Dow shares, which cost holders 23%, including dividends, while the market was up about 0.8%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Fortunately the longer term story is brighter, with total returns averaging about 19% per year over three years. The recent sell-off could be an opportunity if the business remains sound, so it may be worth checking the fundamental data for signs of a long-term growth trend. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with Dow , and understanding them should be part of your investment process.
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 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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