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Some Chart Industries, Inc. (NYSE:GTLS) shareholders are probably rather concerned to see the share price fall 35% over the last three months. But that doesn't undermine the fantastic longer term performance (measured over five years). In fact, during that period, the share price climbed 370%. Impressive! So it might be that some shareholders are taking profits after good performance. But the real question is whether the business fundamentals can improve over the long term.
While the stock has fallen 13% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).
During five years of share price growth, Chart Industries achieved compound earnings per share (EPS) growth of 36% per year. That makes the EPS growth particularly close to the yearly share price growth of 36%. That suggests that the market sentiment around the company hasn't changed much over that time. In fact, the share price seems to largely reflect the EPS growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free interactive report on Chart Industries' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
A Different Perspective
Chart Industries shareholders are down 17% for the year, but the market itself is up 6.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 36% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Chart Industries , and understanding them should be part of your investment process.