Strattec Security Corporation (NASDAQ:STRT) shareholders might be concerned after seeing the share price drop 17% in the last quarter. In contrast the stock has done reasonably well over three years. In fact the stock is up 51%, which is better than the market return of 47%.
While this past week has detracted from the company's three-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.
Strattec Security became profitable within the last three years. That would generally be considered a positive, so we'd expect the share price to be up.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Strattec Security has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Strattec Security's financial health with this free report on its balance sheet.
What About The Total Shareholder Return (TSR)?
We've already covered Strattec Security's share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Dividends have been really beneficial for Strattec Security shareholders, and that cash payout contributed to why its TSR of 54%, over the last 3 years, is better than the share price return.
A Different Perspective
We regret to report that Strattec Security shareholders are down 29% for the year. Unfortunately, that's worse than the broader market decline of 13%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.3% over the last half decade. We realise that Baron Rothschild has said investors should "buy when there is blood on the streets", but we caution that investors should first be sure they are buying a high quality business. It's always interesting to track share price performance over the longer term. But to understand Strattec Security better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with Strattec Security .
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.
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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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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