The three-year shareholder returns and company earnings persist lower as Skyworks Solutions (NASDAQ:SWKS) stock falls a further 9.6% in past week

In order to justify the effort of selecting individual stocks, it's worth striving to beat the returns from a market index fund. But the risk of stock picking is that you will likely buy under-performing companies. We regret to report that long term Skyworks Solutions, Inc. (NASDAQ:SWKS) shareholders have had that experience, with the share price dropping 46% in three years, versus a market return of about 17%. The last week also saw the share price slip down another 9.6%.

If the past week is anything to go by, investor sentiment for Skyworks Solutions isn't positive, so let's see if there's a mismatch between fundamentals and the share price.

See our latest analysis for Skyworks Solutions

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

Skyworks Solutions saw its EPS decline at a compound rate of 17% per year, over the last three years. This fall in EPS isn't far from the rate of share price decline, which was 19% per year. So it seems like sentiment towards the stock hasn't changed all that much over time. Rather, the share price has approximately tracked EPS growth.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

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..

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Skyworks Solutions, it has a TSR of -42% for the last 3 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

Skyworks Solutions shareholders are up 1.9% for the year (even including dividends). But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 0.7% per year, over five years. So this might be a sign the business has turned its fortunes around. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.

There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of undervalued small cap 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 American exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.