Even though Nufarm (ASX:NUF) has lost AU$141m market cap in last 7 days, shareholders are still up 21% over 5 years
The main point of investing for the long term is to make money. Furthermore, you’d generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the Nufarm Limited (ASX:NUF) share price is up 16% in the last five years, that’s less than the market return. The last year has been disappointing, with the stock price down 1.1% in that time.
Although Nufarm has shed AU$141m from its market cap this week, let’s take a look at its longer term fundamental trends and see if they’ve driven returns.
See our latest analysis for Nufarm
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.
During the five years of share price growth, Nufarm moved from a loss to profitability. That’s generally thought to be a genuine positive, so we would expect to see an increasing share price.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
ASX:NUF Earnings Per Share Growth March 15th 2024
It is of course excellent to see how Nufarm has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Nufarm stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Nufarm the TSR over the last 5 years was 21%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
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A Different Perspective
Nufarm shareholders are up 0.9% for the year (even including dividends). But that was short of the market average. It’s probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 4% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. If you would like to research Nufarm in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
But note: Nufarm may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Australian 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.
