Does FedEx's (NYSE:FDX) Share Price Gain of 86% Match Its Business Performance?
If you want to increase wealth in the stock market, you can do so by buying an index fund. But if you pick the right individual titles, you can do more than that. For example, the share price of FedEx Corporation (NYSE: FDX) is up 86% over the past year, well outperforming the market return of around 20% (excluding dividends). So that should make shareholders smile. However, the long-term returns aren't all that impressive: the stock gained only 22% in three years.
Check out our latest analysis for FedEx
In his essay, The Superinvestors of Graham-and-Doddsville, Warren Buffett described how stock prices do not always rationally reflect the value of a company. A flawed but reasonable way to gauge how sentiment has changed in a company is to compare earnings per share (EPS) to its share price.
FedEx went from a loss to a profit in the last year.
The company was close to breakeven last year, so its earnings per share of $ 6.82 isn't particularly noticeable. In terms of the share price, however, the market is satisfied with the first profit. Some investors are looking for companies that have just become profitable as this is an important milestone for business development.
The graphic below shows how the EPS has changed over time (indicate the exact values by clicking the image).
Earnings per share
It's good to see that there have been some significant insider buying over the past three months. That’s positive. However, we believe that earnings and revenue growth trends are even more important drivers. This free interactive report on FedEx's earnings, earnings, and cash flow is a great place to start if you want to explore the stock further.
What about dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and stock price return. The TSR takes into account the value of spin-offs or discounted capital increases and any dividends, based on the assumption that the dividends will be reinvested. It's fair to say that the TSR gives a more complete picture of stocks that pay a dividend. We find that the TSR for FedEx was 89% last year, which is better than the stock price return mentioned above. This is mainly due to the dividend payments!
It's good to see that FedEx has rewarded shareholders with a total return of 89% over the past twelve months. This of course also includes the dividend. With the one-year TSR outperforming the five-year TSR (the latter is 14% annually), the stock's performance seems to have been improving lately. At best, this could suggest some real business momentum, meaning now could be a good time to go deeper. It is always interesting to follow the share price development over the long term. However, to better understand FedEx we need to consider many other factors. For example, take risks - FedEx has 3 warning signs that we think you should be aware of.
FedEx isn't the only stock insider buying. So take a look at this free list of growing companies with insider buying.
Please note that the market returns reported in this article reflect the market-weighted average returns on stocks currently traded on US exchanges.
This article from Simply Wall St is of a general nature. It is not a recommendation to buy or sell shares and does not take into account your goals or your financial situation. We want to provide you with a long-term, focused analysis based on fundamental data. Note that our analysis may not take into account the latest price sensitive company announcements or quality materials. Simply Wall St has no position in the stocks mentioned.
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