Does Kennametal’s (NYSE:KMT) Share Price Gain of 12% Match Its Business Performance?

The main point of investing for the long term is to make money. Better yet, you’d like to see the share price move up more than the market average. Unfortunately for shareholders, while the Kennametal Inc. (NYSE:KMT) share price is up 12% in the last five years, that’s less than the market return. Meanwhile, the last twelve months saw the share price rise 1.2%.

See our latest analysis for Kennametal

To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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.

During the last half decade, Kennametal became profitable. That’s generally thought to be a genuine positive, so we would expect to see an increasing share price.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

NYSE:KMT Past and Future Earnings, January 16th 2020
NYSE:KMT Past and Future Earnings, January 16th 2020

It is of course excellent to see how Kennametal has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Kennametal stock, you should check out this FREE detailed report on its balance sheet.

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 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Kennametal, it has a TSR of 27% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Kennametal shareholders are up 3.6% for the year (even including dividends) . But that was short of the market average. On the bright side, the longer term returns (running at about 4.8% a year, over half a decade) look better. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Be aware that Kennametal is showing 1 warning sign in our investment analysis , you should know about…

Of course Kennametal may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.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.

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. Thank you for reading.