Pulling back 5.0% this week, Regal Rexnord's NYSE:RRX) five-year decline in earnings may be coming into investors focus

If you buy and hold a stock for many years, you'd hope to be making a profit. Furthermore, you'd generally like to see the share price rise faster than the market. But Regal Rexnord Corporation (NYSE:RRX) has fallen short of that second goal, with a share price rise of 69% over five years, which is below the market return. Zooming in, the stock is actually down 10% in the last year.

Since the long term performance has been good but there's been a recent pullback of 5.0%, let's check if the fundamentals match the share price.

We've discovered 1 warning sign about Regal Rexnord. View them for free.

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 five years of share price growth, Regal Rexnord moved from a loss to profitability. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price.

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

We know that Regal Rexnord has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Regal Rexnord will grow revenue in the future.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Regal Rexnord's TSR for the last 5 years was 86%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

While the broader market gained around 11% in the last year, Regal Rexnord shareholders lost 9.2% (even including dividends). 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. On the bright side, long term shareholders have made money, with a gain of 13% per year over half a decade. 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. 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. Take risks, for example - Regal Rexnord has 1 warning sign we think you should be aware of.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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.