New Zealand markets open in 5 hours 57 minutes
  • NZX 50

    11,200.04
    +80.47 (+0.72%)
     
  • NZD/USD

    0.5687
    -0.0044 (-0.77%)
     
  • ALL ORDS

    6,760.60
    +100.80 (+1.51%)
     
  • OIL

    81.99
    -0.16 (-0.19%)
     
  • GOLD

    1,660.30
    -9.70 (-0.58%)
     

Becton Dickinson's (NYSE:BDX) five-year earnings growth trails the favorable shareholder returns

·3-min read

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 Becton, Dickinson and Company (NYSE:BDX) share price is up 33% in the last five years, that's less than the market return. Looking at the last year alone, the stock is up 6.8%.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

Check out our latest analysis for Becton Dickinson

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. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over half a decade, Becton Dickinson managed to grow its earnings per share at 14% a year. The EPS growth is more impressive than the yearly share price gain of 6% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

earnings-per-share-growth
earnings-per-share-growth

We know that Becton Dickinson has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

What About Dividends?

As well as measuring the share price return, investors should also consider the 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Becton Dickinson the TSR over the last 5 years was 46%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Becton Dickinson has rewarded shareholders with a total shareholder return of 11% in the last twelve months. And that does include the dividend. That gain is better than the annual TSR over five years, which is 8%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 2 warning signs for Becton Dickinson (1 is a bit unpleasant!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.

Join A Paid User Research Session
You’ll receive a US$30 Amazon Gift card for 1 hour of your time while helping us build better investing tools for the individual investors like yourself. Sign up here