Mueller Industries (NYSE:MLI) shareholders have achieved a CAGR of 31% over the past three years
It may sound bad, but the worst that can happen when you buy a stock (unleveraged) is that its market price drops to zero. But if you buy shares of a very large company, you can After than double your money. Namely, the Mueller Industries, Inc. (NYSE: MLI) the stock price has climbed 117% over the past three years. Most would be happy with it. On top of that, the stock price is up 12% in about a quarter.
Now, it’s worth looking at company fundamentals as well, as this will help us determine whether the long-term shareholder return has matched the performance of the underlying business.
However, if you’re not interested in researching what drove MLI’s performance, we have a free list of interesting investment ideas to potentially inspire your next investment!
It is undeniable that markets are sometimes efficient, but prices do not always reflect the underlying performance of companies. An imperfect but simple way to examine how a company’s market perception has changed is to compare the evolution of earnings per share (EPS) with the movement of the share price.
Mueller Industries was able to increase EPS by 93% annually over three years, driving the stock price higher. The average annual share price increase of 30% is actually less than EPS growth. We could therefore reasonably conclude that the market has cooled down on the stock. This cautious sentiment is reflected in its (rather low) P/E ratio of 5.09.
The graph below illustrates the evolution of EPS over time (reveal the exact values by clicking on the image).
We appreciate the fact that insiders have been buying stocks over the past twelve months. That said, most people consider profit and revenue growth trends to be a more meaningful guide to the business. Dive deeper into earnings with this interactive chart of earnings, revenue, and cash flow from Mueller Industries.
What about dividends?
It is important to consider the total shareholder return, as well as the stock price return, for a given stock. TSR is a calculation of return that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of all discounted capital raisings and spinoffs. So for companies that pay a generous dividend, the TSR is often much higher than the stock price return. In the case of Mueller Industries, it has a TSR of 127% over the last 3 years. This exceeds the performance of its share price that we mentioned earlier. And there’s no price guessing that dividend payouts largely explain the divergence!
A different perspective
It’s nice to see that Mueller Industries shareholders have received a total shareholder return of 45% over the past year. And that includes the dividend. As the one-year TSR is better than the five-year TSR (the latter standing at 13% per year), it seems that the stock’s performance has improved lately. Someone with an optimistic outlook might see the recent improvement in TSR as indicating that the company itself is improving over time. It is always interesting to follow the evolution of the share price over the long term. But to better understand Mueller Industries, we need to consider many other factors. To this end, you should be aware of the 1 warning sign we spotted with Mueller Industries.
There are many other companies whose insiders buy shares. You probably do not want to miss this free list of growing companies insiders are buying.
Please note that the market returns quoted in this article reflect the average market-weighted returns of stocks currently trading on US exchanges.
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This Simply Wall St article is general in nature. We provide commentary based on historical data and analyst forecasts only using unbiased methodology and our articles are not intended to be financial advice. It is not a recommendation to buy or sell stocks and does not take into account your objectives or financial situation. Our goal is to bring you targeted long-term analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price-sensitive companies or qualitative materials. Simply Wall St has no position in the stocks mentioned.
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