The main aim of stock picking is to find the market-beating stocks. But the main game is to find enough winners to more than offset the losers So we wouldn’t blame long term Cardinal Health, Inc. (NYSE:CAH) shareholders for doubting their decision to hold, with the stock down 37% over a half decade. The last week also saw the share price slip down another 8.6%. Importantly, this could be a market reaction to the recently released financial results. You can check out the latest numbers in our company report.
View our latest analysis for Cardinal Health
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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 five years Cardinal Health’s earnings per share dropped significantly, falling to a loss, with the share price also lower. This was, in part, due to extraordinary items impacting earnings. Since the company has fallen to a loss making position, it’s hard to compare the change in EPS with the share price change. However, we can say we’d expect to see a falling share price in this scenario.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Dive deeper into Cardinal Health’s key metrics by checking this interactive graph of Cardinal Health’s earnings, revenue and cash flow.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Cardinal Health the TSR over the last 5 years was -27%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It’s good to see that Cardinal Health has rewarded shareholders with a total shareholder return of 26% in the last twelve months. And that does include the dividend. That certainly beats the loss of about 4.8% per year over the last half decade. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Case in point: We’ve spotted 2 warning signs for Cardinal Health you should be aware of, and 1 of them is a bit concerning.
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.
This article by Simply Wall St is general in nature. 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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