Investing in Genuine Parts (NYSE:GPC) five years ago would have delivered you a 64% gain
The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. But Genuine Parts Company (NYSE:GPC) has fallen short of that second goal, with a share price rise of 41% over five years, which is below the market return. Some buyers are laughing, though, with an increase of 25% in the last year.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
View our latest analysis for Genuine Parts
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Over half a decade, Genuine Parts managed to grow its earnings per share at 4.2% a year. This EPS growth is slower than the share price growth of 7% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It's probably worth noting we've seen significant insider buying in the last quarter, which we consider a positive. That said, we think earnings and revenue growth trends are even more important factors to consider. It might be well worthwhile taking a look at our free report on Genuine Parts' earnings, revenue and cash flow.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Genuine Parts' TSR for the last 5 years was 64%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Genuine Parts shareholders gained a total return of 29% during the year. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 10% per year over five year. It is possible that returns will improve along with the business fundamentals. 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 1 warning sign for Genuine Parts you should know about.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
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. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology 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 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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