Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, long term PerkinElmer, Inc. (NYSE:PKI) shareholders have enjoyed a 92% share price rise over the last half decade, well in excess of the market return of around 38% (not including dividends).
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
Check out our latest analysis for PerkinElmer
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.
Over half a decade, PerkinElmer managed to grow its earnings per share at 17% a year. This EPS growth is higher than the 14% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that PerkinElmer has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at PerkinElmer'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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of PerkinElmer, it has a TSR of 95% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
While the broader market lost about 22% in the twelve months, PerkinElmer shareholders did even worse, losing 29% (even including dividends). Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. On the bright side, long term shareholders have made money, with a gain of 14% per year over half a decade. 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. It's always interesting to track share price performance over the longer term. But to understand PerkinElmer better, we need to consider many other factors. Take risks, for example - PerkinElmer has 2 warning signs (and 1 which is significant) we think you should know about.