Stock Analysis
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- NYSE:MTRN
Materion (NYSE:MTRN) sheds 4.7% this week, as yearly returns fall more in line with earnings growth
By buying an index fund, investors can approximate the average market return. But if you pick the right individual stocks, you could make more than that. For example, the Materion Corporation (NYSE:MTRN) share price is up 92% in the last three years, clearly besting the market return of around 32% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 25% , including dividends .
In light of the stock dropping 4.7% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive three-year return.
Check out our latest analysis for Materion
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).
Materion was able to grow its EPS at 44% per year over three years, sending the share price higher. This EPS growth is higher than the 24% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Materion has improved its bottom line over the last three years, but what does the future have in store? You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Materion the TSR over the last 3 years was 95%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Materion shareholders have received a total shareholder return of 25% over one year. Of course, that includes the dividend. That's better than the annualised return of 14% 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 Materion better, we need to consider many other factors. Case in point: We've spotted 2 warning signs for Materion you should be aware of.
But note: Materion 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 American exchanges.
What are the risks and opportunities for Materion?
Materion Corporation, through with its subsidiaries, produces advanced engineered materials used in semiconductor, industrial, aerospace and defense, automotive, energy, consumer electronics, and telecom and data center in the United States, Asia, Europe, and internationally.
Rewards
Trading at 18% below our estimate of its fair value
Earnings are forecast to grow 14.01% per year
Earnings grew by 39.9% over the past year
Risks
Significant insider selling over the past 3 months
Has a high level of debt
Further research on
Materion
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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.
About NYSE:MTRN
Materion
Materion Corporation, through with its subsidiaries, produces advanced engineered materials used in semiconductor, industrial, aerospace and defense, automotive, energy, consumer electronics, and telecom and data center in the United States, Asia, Europe, and internationally.
Solid track record with excellent balance sheet.
