Yahoo Finance The total return for KLA (NASDAQ:KLAC) investors has risen faster than earnings growth over the last five years
It hasn't been the best quarter for KLA Corporation (NASDAQ:KLAC) shareholders, since the share price has fallen 14% in that time. But that does not change the realty that the stock's performance has been terrific, over five years. To be precise, the stock price is 368% higher than it was five years ago, a wonderful performance by any measure. So we don't think the recent decline in the share price means its story is a sad one. Only time will tell if there is still too much optimism currently reflected in the share price.
Although KLA has shed US$3.8b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
View our latest analysis for KLA
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.
Over half a decade, KLA managed to grow its earnings per share at 22% a year. This EPS growth is slower than the share price growth of 36% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It might be well worthwhile taking a look at our free report on KLA's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of KLA, it has a TSR of 399% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that KLA has rewarded shareholders with a total shareholder return of 48% in the last twelve months. And that does include the dividend. That's better than the annualised return of 38% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand KLA better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for KLA you should be aware of.
We will like KLA better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) 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 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.
