Tempur Sealy International, Inc. (NYSE:TPX) shareholders have seen the share price descend 11% over the month. But that doesn't change the fact that the returns over the last five years have been very strong. We think most investors would be happy with the 233% return, over that period. Generally speaking the long term returns will give you a better idea of business quality than short periods can. Ultimately business performance will determine whether the stock price continues the positive long term trend.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for Tempur Sealy International
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. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
Over half a decade, Tempur Sealy International managed to grow its earnings per share at 24% a year. This EPS growth is reasonably close to the 27% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. In fact, the share price seems to largely reflect the EPS growth.
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 Tempur Sealy International has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, Tempur Sealy International's TSR for the last 5 years was 243%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that Tempur Sealy International shareholders have received a total shareholder return of 62% over the last year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 28% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Consider risks, for instance. Every company has them, and we've spotted 2 warning signs for Tempur Sealy International you should know about.