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The main aim of stock picking is to find the market-beating stocks. But even the best stock picker will only win with some selections. So we wouldn't blame long term Becton, Dickinson and Company (NYSE:BDX) shareholders for doubting their decision to hold, with the stock down 15% over a half decade.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for Becton Dickinson
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. 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.
While the share price declined over five years, Becton Dickinson actually managed to increase EPS by an average of 8.0% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.
Generally speaking we'd hope to see stronger share price increases on the back of sustained EPS growth, but other metrics may hold a clue to why the share price performance is relatively modest.
The modest 1.8% dividend yield is unlikely to be guiding the market view of the stock. Revenue is actually up 3.1% over the time period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Becton Dickinson is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Becton Dickinson the TSR over the last 5 years was -6.5%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!