The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market Unfortunately for shareholders, while the Guess', Inc. (NYSE:GES) share price is up 36% in the last five years, that's less than the market return. Zooming in, the stock is up just 4.7% in the last year.
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 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).
Guess' became profitable within the last five years. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. So we might find other metrics can better explain the share price movements.
We doubt the modest 1.9% dividend yield is attracting many buyers to the stock. The revenue growth of 2.6% per year hardly seems impressive. So why is the share price up? It's not immediately obvious to us, but a closer look at the company's progress over time might yield answers.
The graphic below depicts how earnings and revenue have 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. You can see what analysts are predicting for Guess' in this interactive graph of future profit estimates.
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 or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Guess' the TSR over the last 5 years was 68%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Guess' shareholders are up 6.2% for the year (even including dividends). Unfortunately this falls short of the market return. On the bright side, the longer term returns (running at about 11% a year, over half a decade) look better. Maybe the share price is just taking a breather while the business executes on its growth strategy. It's always interesting to track share price performance over the longer term. But to understand Guess' better, we need to consider many other factors. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Guess' (of which 1 is significant!) you should know about.
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.
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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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