Investors can buy low cost index fund if they want to receive the average market return. But across the board there are plenty of stocks that underperform the market. That's what has happened with the Johnson Controls International plc (NYSE:JCI) share price. It's up 24% over three years, but that is below the market return. Zooming in, the stock is up a respectable 8.2% in the last year.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Johnson Controls International was able to grow its EPS at 5.4% per year over three years, sending the share price higher. This EPS growth is lower than the 8% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It is quite common to see investors become enamoured with a business, after a few years of solid progress. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 54.40.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Dive deeper into Johnson Controls International's key metrics by checking this interactive graph of Johnson Controls International's earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Johnson Controls International, it has a TSR of 35% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Johnson Controls International shareholders are up 11% for the year (even including dividends). But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 5% over half a decade This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Johnson Controls International better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we've spotted 5 warning signs for Johnson Controls International you should know about.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
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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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. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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