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Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the Winnebago Industries share price has climbed 95% in five years, easily topping the market return of 76% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 17% , including dividends .
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
Check out our latest analysis for Winnebago Industries
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, Winnebago Industries achieved compound earnings per share (EPS) growth of 3.4% per year. This EPS growth is lower than the 14% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Winnebago Industries' key metrics by checking this interactive graph of Winnebago Industries's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Winnebago Industries, it has a TSR of 108% 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
Winnebago Industries shareholders gained a total return of 17% during the year. But that return falls short of the market. On the bright side, that's still a gain, and it's actually better than the average return of 16% over half a decade This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Winnebago Industries better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Winnebago Industries , and understanding them should be part of your investment process.