In order to justify the effort of selecting individual stocks, it’s worth striving to beat the returns from a market index fund. But even the best stock picker will only win with some selections. At this point some shareholders may be questioning their investment in Anixter International Inc. (NYSE:AXE), since the last five years saw the share price fall 18%. The silver lining is that the stock is up 1.8% in about a week.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Looking back five years, both Anixter International’s share price and EPS declined; the latter at a rate of 0.8% per year. This reduction in EPS is less than the 3.9% annual reduction in the share price. This implies that the market was previously too optimistic about the stock.
The graphic below depicts how EPS has changed over time.
We know that Anixter International has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Anixter International stock, you should check out this FREE detailed report on its balance sheet.
A Different Perspective
Anixter International shareholders gained a total return of 7.3% during the year. But that return falls short of the market. But at least that’s still a gain! Over five years the TSR has been a reduction of 3.9% per year, over five years. So this might be a sign the business has turned its fortunes around. Before spending more time on Anixter International it might be wise to click here to see if insiders have been buying or selling shares.
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 US exchanges.
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If you spot an error that warrants correction, please contact the editor at email@example.com. 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.