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Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. To wit, the Ducommun share price has climbed 93% in five years, easily topping the market return of 47% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 17%.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
See our latest analysis for Ducommun
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, Ducommun achieved compound earnings per share (EPS) growth of 56% per year. This EPS growth is higher than the 14% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. This cautious sentiment is reflected in its (fairly low) P/E ratio of 4.76.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how Ducommun has grown profits over the years, but the future is more important for shareholders. This free interactive report on Ducommun's balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
It's good to see that Ducommun has rewarded shareholders with a total shareholder return of 17% in the last twelve months. Since the one-year TSR is better than the five-year TSR (the latter coming in at 14% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Case in point: We've spotted 4 warning signs for Ducommun you should be aware of, and 3 of them are significant.
Of course Ducommun may not be the best stock to buy. So you may wish to see this free collection of growth stocks.