RBC Bearings (NYSE:RBC) stock performs better than its underlying earnings growth over last five years

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the RBC Bearings Incorporated (NYSE:RBC) share price is up 97% in the last 5 years, clearly besting the market return of around 80% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 19% in the last year.

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 RBC Bearings

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.

Over half a decade, RBC Bearings managed to grow its earnings per share at 7.6% a year. This EPS growth is lower than the 15% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 50.33.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

It is of course excellent to see how RBC Bearings has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at RBC Bearings' financial health with this free report on its balance sheet.

A Different Perspective

RBC Bearings shareholders gained a total return of 19% during the year. But that was short of the market average. On the bright side, that's still a gain, and it's actually better than the average return of 15% over half a decade This suggests the company might be improving over time. Before spending more time on RBC Bearings it might be wise to click here to see if insiders have been buying or selling shares.

For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.