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. But PVH Corp. (NYSE:PVH) has fallen short of that second goal, with a share price rise of 10% over five years, which is below the market return. Looking at the last year alone, the stock is up 8.1%.
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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, PVH managed to grow its earnings per share at 8.2% a year. This EPS growth is higher than the 2% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. This cautious sentiment is reflected in its (fairly low) P/E ratio of 8.48.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
It is of course excellent to see how PVH has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at PVH's financial health with this free report on its balance sheet.
A Different Perspective
PVH provided a TSR of 8.3% over the last twelve months. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 2% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. If you would like to research PVH in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
We will like PVH 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.
