While Taylor Morrison Home Corporation (NYSE:TMHC) shareholders are probably generally happy, the stock hasn't had particularly good run recently, with the share price falling 10% in the last quarter. But the silver lining is the stock is up over five years. However we are not very impressed because the share price is only up 41%, less than the market return of 76%.
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 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.
Over half a decade, Taylor Morrison Home managed to grow its earnings per share at 7.0% a year. This EPS growth is remarkably close to the 7.2% average annual increase in the share price. Therefore one could conclude that sentiment towards the shares hasn't morphed very much. Rather, the share price has approximately tracked EPS growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on Taylor Morrison Home's earnings, revenue and cash flow.
A Different Perspective
We're pleased to report that Taylor Morrison Home shareholders have received a total shareholder return of 39% over one year. That gain is better than the annual TSR over five years, which is 7.2%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. Case in point: We've spotted 2 warning signs for Taylor Morrison Home you should be aware of, and 1 of them is potentially serious.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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