Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. Unfortunately the BorgWarner Inc. (NYSE:BWA) share price slid 27% over twelve months. That’s disappointing when you consider the market declined 18%. At least the damage isn’t so bad if you look at the last three years, since the stock is down 15% in that time.
Now let’s have a look at the company’s fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for BorgWarner
To quote Buffett, ‘Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace…’ 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.
Even though the BorgWarner share price is down over the year, its EPS actually improved. It could be that the share price was previously over-hyped.
It’s fair to say that the share price does not seem to be reflecting the EPS growth. But we might find some different metrics explain the share price movements better.
With a low yield of 2.0% we doubt that the dividend influences the share price much. BorgWarner managed to grow revenue over the last year, which is usually a real positive. Since we can’t easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
BorgWarner is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for BorgWarner in this interactive graph of future profit estimates.
A Different Perspective
While the broader market lost about 18% in the twelve months, BorgWarner shareholders did even worse, losing 26% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Regrettably, last year’s performance caps off a bad run, with the shareholders facing a total loss of 4% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. 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. For example, we’ve discovered 3 warning signs for BorgWarner that you should be aware of before investing here.
We will like BorgWarner better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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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