The 17% return this week takes Newell Brands' (NASDAQ:NWL) shareholders three-year gains to 78%

By
Simply Wall St
Published
February 16, 2022
NasdaqGS:NWL
Source: Shutterstock

Investors can buy low cost index fund if they want to receive the average market return. But across the board there are plenty of stocks that underperform the market. Unfortunately for shareholders, while the Newell Brands Inc. (NASDAQ:NWL) share price is up 53% in the last three years, that falls short of the market return. Zooming in, the stock is up a respectable 9.5% in the last year.

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 Newell Brands

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During three years of share price growth, Newell Brands moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up.

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

earnings-per-share-growth
NasdaqGS:NWL Earnings Per Share Growth February 16th 2022

We know that Newell Brands has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

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. We note that for Newell Brands the TSR over the last 3 years was 78%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's nice to see that Newell Brands shareholders have received a total shareholder return of 14% over the last year. And that does include the dividend. Notably the five-year annualised TSR loss of 6% per year compares very unfavourably with the recent share price performance. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted 1 warning sign for Newell Brands you should be aware of.

Of course Newell Brands 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.

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