The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. Long term TransDigm Group Incorporated (NYSE:TDG) shareholders would be well aware of this, since the stock is up 177% in five years. On top of that, the share price is up 17% in about a quarter. This could be related to the recent financial results, released recently – you can catch up on the most recent data by reading our company report.
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. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During five years of share price growth, TransDigm Group achieved compound earnings per share (EPS) growth of 66% per year. The EPS growth is more impressive than the yearly share price gain of 23% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.
This free interactive report on TransDigm Group’s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What about the Total Shareholder Return (TSR)?
Investors should note that there’s a difference between TransDigm Group’s total shareholder return (TSR) and its share price change, which we’ve covered above. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. TransDigm Group hasn’t been paying dividends, but its TSR of 249% exceeds its share price return of 177%, implying it has either spun-off a business, or raised capital at a discount; thereby providing additional value to shareholders.
A Different Perspective
We’re pleased to report that TransDigm Group shareholders have received a total shareholder return of 54% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 28% per year), it would seem that the stock’s performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Before spending more time on TransDigm Group it might be wise to click here to see if insiders have been buying or selling shares.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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.