When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. Long term Crown Holdings, Inc. (NYSE:CCK) shareholders would be well aware of this, since the stock is up 112% in five years. Also pleasing for shareholders was the 31% gain in the last three months. But this move may well have been assisted by the reasonably buoyant market (up 15% in 90 days).
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, Crown Holdings achieved compound earnings per share (EPS) growth of 9.3% per year. This EPS growth is slower than the share price growth of 16% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It might be well worthwhile taking a look at our free report on Crown Holdings' earnings, revenue and cash flow.
A Different Perspective
It's nice to see that Crown Holdings shareholders have received a total shareholder return of 39% over the last year. That gain is better than the annual TSR over five years, which is 16%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Crown Holdings (of which 1 is concerning!) you should know about.
Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.
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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What are the risks and opportunities for Crown Holdings?
Trading at 56.9% below our estimate of its fair value
Earnings are forecast to grow 17.18% per year
Debt is not well covered by operating cash flow
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. 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.
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