Investing in Spectrum Brands Holdings (NYSE:SPB) five years ago would have delivered you a 85% gain

If you buy and hold a stock for many years, you'd hope to be making a profit. Furthermore, you'd generally like to see the share price rise faster than the market. But Spectrum Brands Holdings, Inc. (NYSE:SPB) has fallen short of that second goal, with a share price rise of 64% over five years, which is below the market return. Looking at the last year alone, the stock is up 9.2%.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

See our latest analysis for Spectrum Brands Holdings

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.

Spectrum Brands Holdings has made a profit in the past. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. So it might be better to look at other metrics to try to understand the share price.

We doubt the modest 2.0% dividend yield is attracting many buyers to the stock. The revenue reduction of 3.6% per year is not a positive. It certainly surprises us that the share price is up, but perhaps a closer examination of the data will yield answers.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

We like that insiders have been buying shares in the last twelve months. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. This free report showing analyst forecasts should help you form a view on Spectrum Brands Holdings

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Spectrum Brands Holdings the TSR over the last 5 years was 85%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Spectrum Brands Holdings provided a TSR of 12% over the last twelve months. But that was short of the market average. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 13% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. 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 1 warning sign for Spectrum Brands Holdings that you should be aware of before investing here.

Spectrum Brands Holdings is not the only stock insiders are buying. So take a peek at this free list of small cap companies at attractive valuations which insiders have been 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.

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