Winnebago Industries' (NYSE:WGO) 18% CAGR outpaced the company's earnings growth over the same five-year period

By
Simply Wall St
Published
April 14, 2022
NYSE:WGO
Source: Shutterstock

Winnebago Industries, Inc. (NYSE:WGO) shareholders might be concerned after seeing the share price drop 25% in the last quarter. But that doesn't change the fact that shareholders have received really good returns over the last five years. It's fair to say most would be happy with 119% the gain in that time. Generally speaking the long term returns will give you a better idea of business quality than short periods can. The more important question is whether the stock is too cheap or too expensive today.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

Check out our latest analysis for Winnebago Industries

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

Over half a decade, Winnebago Industries managed to grow its earnings per share at 40% a year. The EPS growth is more impressive than the yearly share price gain of 17% over the same period. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 5.28 also suggests market apprehension.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
NYSE:WGO Earnings Per Share Growth April 14th 2022

We know that Winnebago Industries has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Winnebago Industries the TSR over the last 5 years was 131%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Winnebago Industries shareholders are down 28% for the year (even including dividends), but the market itself is up 1.4%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 18%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 2 warning signs for Winnebago Industries you should be aware of, and 1 of them is concerning.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can 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.

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