When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Better yet, you’d like to see the share price move up more than the market average. But Sealed Air Corporation (NYSE:SEE) has fallen short of that second goal, with a share price rise of 42% over five years, which is below the market return. Meanwhile, the last twelve months saw the share price rise 3.6%.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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, Sealed Air achieved compound earnings per share (EPS) growth of 14% per year. The EPS growth is more impressive than the yearly share price gain of 7.2% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
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. Dive deeper into the earnings by checking this interactive graph of Sealed Air’s earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Sealed Air’s TSR for the last 5 years was 52%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Sealed Air shareholders have received returns of 5.2% over twelve months (even including dividends), which isn’t far from the general market return. It has to be noted that the recent return falls short of the 8.7% shareholders have gained each year, over half a decade. More recently, the share price growth has slowed. But it has to be said the overall picture is one of good long term and short term performance. Arguably that makes Sealed Air a stock worth watching. Investors who like to make money usually check up on insider purchases, such as the price paid, and total amount bought. You can find out about the insider purchases of Sealed Air by clicking this link.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).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.