Did you miss the 59% share price gain from Flowserve (NYSE: FLS)?
It is always best to build a diversified portfolio of stocks, as any stock company could be lagging behind the larger market. But if you want to beat the market as a whole, you have to have individual stocks that are outperforming. Flowserve Corporation (NYSE: FLS) has done well over the past year, with the stock price rising 59% beating the market return by 50% (not counting dividends). Unfortunately, long-term returns aren’t as good as the stock has fallen 2.0% in the past three years.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are overly reactive dynamic systems and investors are not always rational. An imperfect but straightforward way to consider how a company’s market perception has changed is to compare the change in earnings per share (EPS) with the movement in the share price.
Over the past year, Flowserve has actually seen its earnings per share drop by 39%.
So we don’t think investors are paying too much attention to BPA. Therefore, it seems likely that investors will place more weight on indicators other than EPS, for now.
We are skeptical of the suggestion that the 1.9% dividend yield would attract buyers to the stock. Flowserve’s revenue actually fell 6.4% from last year. Thus, the fundamentals do not provide an obvious explanation for the rise in the share price.
The image below shows how revenue and income have been tracked over time (if you click on the image you can see more details).
NYSE: FLS Profit and Revenue Growth May 9, 2021
Flowserve is a well-known stock, with wide analyst coverage, which suggests some visibility into future growth. If you are thinking of buying or selling Flowserve shares, you should check this out free report showing analyst consensus estimates for future earnings.
What about dividends?
In addition to measuring stock price performance, investors should also consider total shareholder return (TSR). The TSR incorporates the value of any discounted demerger or capital increase, as well as any dividend, based on the assumption that dividends are reinvested. So, for companies that pay a generous dividend, the TSR is often much higher than the return on the share price. In the case of Flowserve, it has a TSR of 63% for the past year. This exceeds the share price return we mentioned earlier. This is largely the result of his dividend payments!
A different perspective
It is good to see that Flowserve has rewarded its shareholders with a total shareholder return of 63% over the past twelve months. This includes the dividend. This gain is better than the annual five-year TSR, which is 0.7%. Therefore, it seems that sentiment around the company has been positive lately. Since the stock price momentum remains strong, it might be worth taking a closer look at the stock for fear of missing out on an opportunity. I find it very interesting to look at the stock price over the long term as an indicator of the performance of the company. But to really understand better, we have to take other information into account as well. For example, we discovered 4 warning signs for Flowserve which you should be aware of before investing here.
We’ll like Flowserve better if we see big insider buying. While we wait watch this free list of growing companies with recent and significant insider buying.
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on US stock exchanges.
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