Tyson Foods' (NYSE:TSN) 18% CAGR outpaced the company's earnings growth over the same three-year period

By
Simply Wall St
Published
January 17, 2022
NYSE:TSN
Source: Shutterstock

Investors can buy low cost index fund if they want to receive the average market return. But in any diversified portfolio of stocks, you'll see some that fall short of the average. For example, the Tyson Foods, Inc. (NYSE:TSN) share price return of 54% over three years lags the market return in the same period. On the other hand, the more recent gain of 45% over a year is certainly pleasing.

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.

View our latest analysis for Tyson Foods

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, Tyson Foods achieved compound earnings per share growth of 1.0% per year. This EPS growth is lower than the 15% average annual increase in the share price. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It's not unusual to see the market 're-rate' a stock, after a few years of growth.

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

earnings-per-share-growth
NYSE:TSN Earnings Per Share Growth January 17th 2022

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

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Tyson Foods the TSR over the last 3 years was 65%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Tyson Foods shareholders have received a total shareholder return of 48% over one year. And that does include the dividend. That's better than the annualised return of 11% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Tyson Foods better, we need to consider many other factors. Even so, be aware that Tyson Foods is showing 2 warning signs in our investment analysis , and 1 of those makes us a bit uncomfortable...

But note: Tyson Foods may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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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