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When we invest, we're generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. To wit, the Brady share price has climbed 86% in five years, easily topping the market return of 44% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 39%, including dividends.
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.
During the last half decade, Brady became profitable. That would generally be considered a positive, so we'd expect the share price to be up. Since the company was unprofitable five years ago, but not three years ago, it's worth taking a look at the returns in the last three years, too. We can see that the Brady share price is up 58% in the last three years. Meanwhile, EPS is up 104% per year. This EPS growth is higher than the 16% average annual increase in the share price over the same three years. So you might conclude the market is a little more cautious about the stock, these days.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It is of course excellent to see how Brady has grown profits over the years, but the future is more important for shareholders. This free interactive report on Brady's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Brady's TSR for the last 5 years was 112%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that Brady shareholders have received a total shareholder return of 39% over the last year. Of course, that includes the dividend. That's better than the annualised return of 16% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. If you would like to research Brady in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
We will like Brady better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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 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. Thank you for reading.