New Zealand markets closed
  • NZX 50

    12,197.15
    +44.99 (+0.37%)
     
  • NZD/USD

    0.6330
    -0.0144 (-2.23%)
     
  • NZD/EUR

    0.5856
    -0.0069 (-1.17%)
     
  • ALL ORDS

    7,771.80
    +43.30 (+0.56%)
     
  • ASX 200

    7,558.10
    +46.50 (+0.62%)
     
  • OIL

    73.23
    -2.65 (-3.49%)
     
  • GOLD

    1,865.90
    -50.40 (-2.63%)
     
  • NASDAQ

    12,573.36
    -229.78 (-1.79%)
     
  • FTSE

    7,901.80
    +81.64 (+1.04%)
     
  • Dow Jones

    33,926.01
    -127.93 (-0.38%)
     
  • DAX

    15,476.43
    -32.76 (-0.21%)
     
  • Hang Seng

    21,660.47
    -297.89 (-1.36%)
     
  • NIKKEI 225

    27,509.46
    +107.41 (+0.39%)
     
  • NZD/JPY

    83.0100
    -0.2030 (-0.24%)
     

West Pharmaceutical Services' (NYSE:WST) earnings growth rate lags the 18% CAGR delivered to shareholders

The last three months have been tough on West Pharmaceutical Services, Inc. (NYSE:WST) shareholders, who have seen the share price decline a rather worrying 33%. But that doesn't change the fact that the returns over the last five years have been very strong. Indeed, the share price is up an impressive 123% in that time. We think it's more important to dwell on the long term returns than the short term returns. Ultimately business performance will determine whether the stock price continues the positive long term trend. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 48% decline over the last twelve months.

Since the long term performance has been good but there's been a recent pullback of 3.2%, let's check if the fundamentals match the share price.

See our latest analysis for West Pharmaceutical Services

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 half a decade, West Pharmaceutical Services managed to grow its earnings per share at 27% a year. This EPS growth is higher than the 17% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

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

We know that West Pharmaceutical Services 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?

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of West Pharmaceutical Services, it has a TSR of 127% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We regret to report that West Pharmaceutical Services shareholders are down 47% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 21%. 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. Longer term investors wouldn't be so upset, since they would have made 18%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. It's always interesting to track share price performance over the longer term. But to understand West Pharmaceutical Services better, we need to consider many other factors. Take risks, for example - West Pharmaceutical Services has 1 warning sign we think you should be aware of.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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