Lindsay’s (NYSE:LNN) total investor return has grown faster than earnings growth over the past five years

Generally speaking, the goal of active stock selection is to find companies that offer returns above the market average. And in our experience, buying the right stocks can give your wealth a significant boost. Namely, Lindsay’s stock price has soared 67% in five years, easily outpacing the market return of 49% (excluding dividends).

Although the stock has fallen 5.9% this week, it is worth focusing on the long term and seeing if historical stock returns have been driven by underlying fundamentals.

However, if you’re not interested in researching what drove LNN’s performance, we have a free list of interesting investment ideas to potentially inspire your next investment!

To quote Buffett, “Ships will circumnavigate the globe, but the Flat Earth Society will prosper. There will continue to be wide gaps between price and value in the market…’ An imperfect but simple way to examine how a company’s market perception has changed is to compare the evolution of earnings by action (EPS) with action price movement.

In half a decade, Lindsay has managed to grow its earnings per share by 16% per year. The EPS growth is more impressive than the annual share price gain of 11% over the same period. Therefore, it seems that the market has become relatively pessimistic towards the company.

You can see below how the EPS has evolved over time (find out the exact values ​​by clicking on the image).

NYSE: LNN earnings per share growth September 17, 2022

We are pleased to report that the CEO is compensated more modestly than most CEOs of similarly capitalized companies. It’s always worth keeping an eye on CEO compensation, but a more important question is whether the company will grow its profits over the years. Before buying or selling a stock, we always recommend a careful review of historical growth trends, available here.

What about dividends?

It is important to consider the total shareholder return, as well as the stock price return, for a given stock. TSR is a calculation of return that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of all discounted capital raisings and spinoffs. It’s fair to say that the TSR gives a more complete picture of stocks that pay a dividend. We note that for Lindsay the TSR over the past 5 years was 77%, which is better than the stock price return mentioned above. And there’s no price guessing that dividend payouts largely explain the divergence!

A different perspective

While it’s never nice to take a loss, Lindsay shareholders can rest assured that, including dividends, their 1.4% year-over-year loss was not nearly as bad as the loss of about 17% in the market. Of course, the long-term returns are much more important, and the good news is that over five years, the stock has returned 12% for each year. The company may only face short-term problems, but shareholders should keep a close eye on the fundamentals. I find it very interesting to look at stock price over the long term as a proxy for company performance. But to really get insight, we also need to consider other information. Take for example the ubiquitous specter of investment risk. We have identified 1 warning sign with Lindsay, and understanding them should be part of your investment process.

Sure Lindsay may not be the best stock to buy. So you might want to see this free collection of growth values.

Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on US exchanges.

This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.

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