The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, you can make far more than 100% on a really good stock. For instance, the price of MKS Instruments, Inc. (NASDAQ:MKSI) stock is up an impressive 132% over the last five years. In the last week the share price is up 7.3%.
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...' 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, MKS Instruments achieved compound earnings per share (EPS) growth of 23% per year. The EPS growth is more impressive than the yearly share price gain of 18% over the same period. So one could conclude that the broader market has become more cautious towards the stock.
We know that MKS Instruments has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at MKS Instruments's financial health with this free report on its balance sheet.
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. In the case of MKS Instruments, it has a TSR of 148% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Investors in MKS Instruments had a tough year, with a total loss of 15% (including dividends), against a market gain of about 1.1%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 20%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. If you would like to research MKS Instruments in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
If you are like me, then you will 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.
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 firstname.lastname@example.org. 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.