It hasn’t been the best quarter for Taylor Devices, Inc. (NASDAQ:TAYD) shareholders, since the share price has fallen 14% in that time. But that does not change the realty that the stock’s performance has been terrific, over five years. To be precise, the stock price is 339% higher than it was five years ago, a wonderful performance by any measure. So we don’t think the recent decline in the share price means its story is a sad one. Of course what matters most is whether the business can improve itself sustainably, thus justifying a higher price.
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 Taylor Devices
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 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).
Over half a decade, Taylor Devices managed to grow its earnings per share at 38% a year. This EPS growth is reasonably close to the 34% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn’t morphed very much. In fact, the share price seems to largely reflect the EPS growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
It’s nice to see that Taylor Devices shareholders have received a total shareholder return of 107% over the last year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 34% per year), it would seem that the stock’s performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. For instance, we’ve identified 1 warning sign for Taylor Devices that you should be aware of.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
