Yahoo Finance The total return for W.W. Grainger (NYSE:GWW) investors has risen faster than earnings growth over the last five years
The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. Long term W.W. Grainger, Inc. (NYSE:GWW) shareholders would be well aware of this, since the stock is up 231% in five years. It's also good to see the share price up 15% over the last quarter. But this could be related to the strong market, which is up 7.3% in the last three months.
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 W.W. Grainger
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
During five years of share price growth, W.W. Grainger achieved compound earnings per share (EPS) growth of 22% per year. So the EPS growth rate is rather close to the annualized share price gain of 27% per year. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. 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).
We know that W.W. Grainger has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at W.W. Grainger's financial health with this free 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). 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. In the case of W.W. Grainger, it has a TSR of 257% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that W.W. Grainger has rewarded shareholders with a total shareholder return of 47% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 29%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 1 warning sign for W.W. Grainger that you should be aware of.
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 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.
