If you want to compound wealth in the stock market, you can do it by buying index funds. But investors can enhance returns by choosing to hold shares in market-leading companies. That is to say, Carpenter Technologies (NYSE:CRS) shares are 52% higher than they were a year ago, far better than the market’s roughly 15% decline (excluding dividends) over the same period. By our standards, this is a solid performance! In contrast, long-term returns are negative, as shares are 20% lower than they were three years ago.
Backed by a solid 7-day performance, let’s take a look at what role the company’s fundamentals play in driving long-term shareholder returns.
Our analysis shows CRS is underrated!
With Carpenter Technology losing money over the past 12 months, we think the market may be more focused on revenue and revenue growth, at least for now. Generally, companies with no profits are expected to grow revenue each year, and at a rapid rate. That’s because rapid revenue growth can easily be extrapolated into forecasting profits, and profits are often quite substantial.
Over the past twelve months, Carpenter Technology’s revenue has grown 31%. That’s a pretty impressive growth rate. While the stock price is doing well, up 52% in 12 months, you can argue that the revenue growth is worth it. If earnings stay on trend, there could be more share price gains. But before forming a view on the future, it is crucial to examine profitability and cash flow.
You can see in the graph below how income and earnings have changed over time (click the graph to see exact values).
If you’re considering buying or selling Carpenter Technology stock, you should check out free A detailed report of its balance sheet.
What about dividends?
In addition to measuring share price return, investors should also consider total shareholder return (TSR). While share price returns reflect only changes in share price, TSR includes the value of dividends (assuming they are reinvested) and proceeds from any discounted financings or spin-offs. Arguably, the TSR more fully describes the return a stock generates. We note that Carpenter Technology has a TSR of 56% over the past 1 year, which is better than the share price return mentioned above. This is mostly a result of its dividend!
We are pleased to report that Carpenter Technology shareholders achieved a total shareholder return of 56% in one year. This does include dividends. That certainly outpaces losses of about 1.4% per year over the past five years. We generally place more emphasis on short-term long-term performance, but recent improvements may signal a (positive) inflection point in the business. While it’s worth considering the different effects that market conditions can have on stock prices, there are other, more important factors. Consider, for example, the ever-present specter of investment risk. We have identified 2 warning signs Working with Carpenter Technology, understanding them should be part of your investment process.
If you’d rather look at another company – one with potentially better financials – then don’t miss this free List of companies that have proven to increase earnings.
Note that the market returns quoted in this article reflect the market-weighted average return of stocks currently traded on U.S. exchanges.
Valuation is complicated, but we’re helping make it simple.
find out if carpenter technology It may be overvalued or undervalued by viewing our comprehensive analysis, which includes Fair value estimates, risks and caveats, dividends, insider trading and financial health.
View free analysis
Have feedback on this article? Concerned about content? keep in touch Contact us directly. Alternatively, email the editorial team (at) simplywallst.com.
This article by Simply Wall St is general in nature. We use only an unbiased methodology to provide reviews based on historical data and analyst forecasts, and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or your financial situation. Our goal is to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no positions in any of the stocks mentioned.