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When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you’d generally like to see the share price rise faster than the market But Silgan Holdings Inc. (NASDAQ:SLGN) has fallen short of that second goal, with a share price rise of 20% over five years, which is below the market return. Zooming in, the stock is up just 0.7% in the last year.
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 five years of share price growth, Silgan Holdings achieved compound earnings per share (EPS) growth of 7.0% per year. The EPS growth is more impressive than the yearly share price gain of 3.6% over the same period. So it seems the market isn’t so enthusiastic about the stock these days.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases in the last year. Having said that, most people consider earnings and revenue growth trends to be a more meaningful guide to the business. Dive deeper into the earnings by checking this interactive graph of Silgan Holdings’s earnings, revenue and cash flow.
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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Silgan Holdings, it has a TSR of 27% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Silgan Holdings shareholders are up 2.2% for the year (even including dividends). But that was short of the market average. On the bright side, the longer term returns (running at about 4.9% a year, over half a decade) look better. It’s quite possible the business continues to execute with prowess, even as the share price gains are slowing. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.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 firstname.lastname@example.org. 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.