By buying an index fund, you can roughly match the market return with ease. But if you choose individual stocks with prowess, you can make superior returns. For example, the The Goodyear Tire & Rubber Company (NASDAQ:GT) share price is up 48% in the last three years, clearly besting the market return of around 31% (not including dividends). However, more recent returns haven’t been as impressive as that, with the stock returning just 23% in the last year.
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.
View our latest analysis for Goodyear Tire & Rubber
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During three years of share price growth, Goodyear Tire & Rubber moved from a loss to profitability. That would generally be considered a positive, so we’d expect the share price to be up.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Goodyear Tire & Rubber has improved its bottom line over the last three years, but what does the future have in store? Take a more thorough look at Goodyear Tire & Rubber’s financial health with this free report on its balance sheet.
A Different Perspective
It’s good to see that Goodyear Tire & Rubber has rewarded shareholders with a total shareholder return of 23% in the last twelve months. Notably the five-year annualised TSR loss of 6% per year compares very unfavourably with the recent share price performance. This makes us a little wary, but the business might have turned around its fortunes. 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 3 warning signs for Goodyear Tire & Rubber you should be aware of, and 1 of them can’t be ignored.
But note: Goodyear Tire & Rubber 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 American 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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