Waters (NYSE:WAT) sheds 3.6% this week, as yearly returns fall more in line with earnings growth

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 Waters Corporation (NYSE:WAT) has fallen short of that second goal, with a share price rise of 73% over five years, which is below the market return. The last year hasn't been great either, with the stock up just 2.9%.

Although Waters has shed US$780m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

Our free stock report includes 1 warning sign investors should be aware of before investing in Waters. Read for free now.

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Waters achieved compound earnings per share (EPS) growth of 6.1% per year. This EPS growth is lower than the 12% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

A Different Perspective

Waters provided a TSR of 2.9% over the last twelve months. Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 12% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Even so, be aware that Waters is showing 1 warning sign in our investment analysis , you should know about...

Waters 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.