When you buy a stock, there is always a chance that it will drop by 100%. But on the bright side, you can earn well over 100% with a really good stock. Long term CF Industries Holdings, Inc. (NYSE: CF) Shareholders would be well aware of this, since the stock has risen 114% in five years. On top of that, the share price rose 15% in about a quarter.
Check out our latest analysis for CF Industries Holdings
To paraphrase Benjamin Graham: In the short term the market is a voting machine, but in the long term it is a weighing machine. An imperfect but reasonable way to gauge how sentiment is changing around a company is to compare earnings per share (EPS) with the stock price.
During five years of share price growth, CF Industries Holdings has seen its EPS fall 2.5% per year.
So it’s hard to say that earnings per share is the best metric to judge the business because it might not be optimized for earnings at this point. Therefore, it is worth taking a look at other metrics to try to understand the movements of the stock price.
The revenue growth of 2.3% per year hardly seems impressive. So why is the share price rising? It’s not immediately obvious to us, but a closer look at the company’s progress over time might provide answers.
The company’s revenue and profits (over time) are shown in the image below (click to see exact numbers).
CF Industries Holdings is a well-known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Considering we have a good number of analyst forecasts, it might be worth checking this out. free graph showing consensus estimates.
What about dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. TSR is a yield calculation that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of any discounted capital increase and spinoff. Arguably, the TSR gives a more complete picture of the return generated by a stock. We note that for CF Industries Holdings, the TSR over the past 5 years was 153%, which is better than the share price performance mentioned above. And there’s no price guessing that dividend payments are a big part of the reason for the discrepancy!
A different perspective
It is good to see that CF Industries Holdings has rewarded its shareholders with a total shareholder return of 78% over the past twelve months. And that includes the dividend. As the 1-year TSR is better than the 5-year TSR (the latter standing at 20% per year), it seems that the performance of the stock has improved in recent times. At the best of times, this can portend real business momentum, implying that now may be a good time to dig deep. While it is 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 discovered 1 warning sign for CF Industries Holdings which you should know before investing here.
For those who like to find winning investments this free list of growing companies with recent insider buys, might be just the ticket.
Please note that the market returns quoted in this article reflect the market-weighted average returns of stocks currently traded on US stock exchanges.
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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative material. Simply Wall St has no position in any of the stocks mentioned.
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