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When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the Franklin Covey Co. (NYSE:FC) share price is up 14% in the last five years, that's less than the market return. The last year hasn't been great either, with the stock up just 2.0%.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
View our latest analysis for Franklin Covey
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 the five years of share price growth, Franklin Covey moved from a loss to profitability. That would generally be considered a positive, so we'd hope to see the share price to rise. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. In fact, the Franklin Covey stock price is 1.8% lower in the last three years. During the same period, EPS grew by 15% each year. It would appear there's a real mismatch between the increasing EPS and the share price, which has declined -0.6% a year for three years.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Franklin Covey has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
A Different Perspective
Franklin Covey provided a TSR of 2.0% over the last twelve months. Unfortunately this falls short of the market return. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 3% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. Is Franklin Covey cheap compared to other companies? These 3 valuation measures might help you decide.
For those who like to find winning investments this free list of undervalued 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 American exchanges.
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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.