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It might be of some concern to shareholders to see the Lear Corporation (NYSE:LEA) share price down 10% in the last month. But that doesn't change the fact that the returns over the last year have been pleasing. Looking at the full year, the company has easily bested an index fund by gaining 64%.
See our latest analysis for Lear
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 last year, Lear actually saw its earnings per share drop 54%.
So we don't think that investors are paying too much attention to EPS. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.
We doubt the modest 0.6% dividend yield is doing much to support the share price. Unfortunately Lear's fell 6.1% over twelve months. So using a snapshot of key business metrics doesn't give us a good picture of why the market is bidding up the stock.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Lear is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Lear in this interactive graph of future profit estimates.
A Different Perspective
It's good to see that Lear has rewarded shareholders with a total shareholder return of 64% in the last twelve months. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 10% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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 risks, for instance. Every company has them, and we've spotted 4 warning signs for Lear you should know about.
But note: Lear may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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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