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When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, you can make far more than 100% on a really good stock. For example, the Stryker Corporation (NYSE:SYK) share price has soared 152% in the last half decade. Most would be very happy with that. In the last week shares have slid back 1.2%.
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 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.
During five years of share price growth, Stryker achieved compound earnings per share (EPS) growth of 36% per year. The EPS growth is more impressive than the yearly share price gain of 20% over the same period. So it seems the market isn’t so enthusiastic about the stock these days.
We know that Stryker has improved its bottom line lately, but is it going to grow revenue? If you’re interested, you could check this free report showing consensus revenue forecasts.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Stryker, it has a TSR of 169% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It’s good to see that Stryker has rewarded shareholders with a total shareholder return of 20% in the last twelve months. Of course, that includes the dividend. However, that falls short of the 22% TSR per annum it has made for shareholders, each year, over five years. Before spending more time on Stryker it might be wise to click here to see if insiders have been buying or selling shares.
Of course Stryker 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.