RTX (NYSE:RTX) delivers shareholders respectable 9.5% CAGR over 3 years, surging 3.7% in the last week alone

By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. Just take a look at RTX Corporation (NYSE:RTX), which is up 22%, over three years, soundly beating the market return of 14% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 13%, including dividends.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

See our latest analysis for RTX

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.

RTX became profitable within the last three years. So we would expect a higher share price over the period.

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

It might be well worthwhile taking a look at our free report on RTX's earnings, revenue and cash flow.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of RTX, it has a TSR of 31% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

RTX shareholders gained a total return of 13% during the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 11% over half a decade It is possible that returns will improve along with the business fundamentals. 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. For example, we've discovered 4 warning signs for RTX that you should be aware of before investing here.

We will like RTX better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.