Entegris' (NASDAQ:ENTG) earnings growth rate lags the 48% CAGR delivered to shareholders

By
Simply Wall St
Published
January 10, 2022
NasdaqGS:ENTG
Source: Shutterstock

Entegris, Inc. (NASDAQ:ENTG) shareholders have seen the share price descend 10% over the month. But that does not change the realty that the stock's performance has been terrific, over five years. To be precise, the stock price is 597% higher than it was five years ago, a wonderful performance by any measure. Arguably, the recent fall is to be expected after such a strong rise. The most important thing for savvy investors to consider is whether the underlying business can justify the share price gain. We love happy stories like this one. The company should be really proud of that performance!

Since the long term performance has been good but there's been a recent pullback of 4.7%, let's check if the fundamentals match the share price.

View our latest analysis for Entegris

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).

Over half a decade, Entegris managed to grow its earnings per share at 35% a year. This EPS growth is lower than the 47% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This optimism is visible in its fairly high P/E ratio of 47.37.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
NasdaqGS:ENTG Earnings Per Share Growth January 10th 2022

We know that Entegris has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Entegris' balance sheet strength is a great place to start, if you want to investigate the stock further.

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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Entegris, it has a TSR of 615% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Entegris has rewarded shareholders with a total shareholder return of 33% in the last twelve months. That's including the dividend. Having said that, the five-year TSR of 48% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Entegris you should know about.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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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