Textron's (NYSE:TXT) investors will be pleased with their favorable 66% return over the last five years

If you buy and hold a stock for many years, you'd hope to be making a profit. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the Textron Inc. (NYSE:TXT) share price is up 64% in the last five years, that's less than the market return. Some buyers are laughing, though, with an increase of 28% in the last year.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

See our latest analysis for Textron

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

Textron's earnings per share are down 0.3% per year, despite strong share price performance over five years.

By glancing at these numbers, we'd posit that the decline in earnings per share is not representative of how the business has changed over the years. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.

The modest 0.09% dividend yield is unlikely to be propping up the share price. We are not particularly impressed by the annual compound revenue growth of 0.2% over five years. So it seems one might have to take closer look at earnings and revenue trends to see how they might influence the share price.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

Textron is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts

A Different Perspective

It's good to see that Textron has rewarded shareholders with a total shareholder return of 29% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 11%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Textron better, we need to consider many other factors. For instance, we've identified 1 warning sign for Textron that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com