If you buy and hold a stock for many years, you'd hope to be making a profit. Better yet, you'd like to see the share price move up more than the market average. But Otter Tail Corporation (NASDAQ:OTTR) has fallen short of that second goal, with a share price rise of 66% over five years, which is below the market return. Over the last twelve months the stock price has risen a very respectable 16%.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
During five years of share price growth, Otter Tail achieved compound earnings per share (EPS) growth of 9.6% per year. So the EPS growth rate is rather close to the annualized share price gain of 11% per year. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Otter Tail has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Otter Tail will grow revenue in the future.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Otter Tail the TSR over the last 5 years was 95%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Otter Tail shareholders gained a total return of 20% during the year. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 14% over half a decade This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Otter Tail better, we need to consider many other factors. Even so, be aware that Otter Tail is showing 2 warning signs in our investment analysis , you should know about...
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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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