The simplest way to invest in stocks is to buy exchange traded funds. But you can significantly boost your returns by picking above-average stocks. To wit, the Brinker International, Inc. (NYSE:EAT) share price is 87% higher than it was a year ago, much better than the market return of around 25% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! Having said that, the longer term returns aren't so impressive, with stock gaining just 20% in three years.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
There is no denying that markets are sometimes efficient, but prices do not always reflect 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.
Brinker International was able to grow EPS by 70% in the last twelve months. This EPS growth is reasonably close to the 87% increase in the share price. This makes us think the market hasn't really changed its sentiment around the company, in the last year. It looks like the share price is responding to the EPS.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how Brinker International has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Brinker International's financial health with this free report on its balance sheet.
A Different Perspective
We're pleased to report that Brinker International shareholders have received a total shareholder return of 87% over one year. That gain is better than the annual TSR over five years, which is 13%. 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. To that end, you should be aware of the 2 warning signs we've spotted with Brinker International .
We will like Brinker International 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.