Unfortunately, investing is risky - companies can and do go bankrupt. But if you pick the right stock, you can make a lot more than 100%. For example, the Mohawk Industries, Inc. (NYSE:MHK) share price had more than doubled in just one year - up 119%. And in the last week the share price has popped 5.8%. But this might be partly because the broader market had a good week last week, gaining 3.3%. Having said that, the longer term returns aren't so impressive, with stock gaining just 3.4% in three years.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
Over the last twelve months, Mohawk Industries actually shrank its EPS by 9.3%.
Given the share price gain, we doubt the market is measuring progress with EPS. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.
Revenue was pretty stable on last year, so deeper research might be needed to explain the share price rise.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).NYSE:MHK Earnings and Revenue Growth July 27th 2021
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. If you are thinking of buying or selling Mohawk Industries stock, you should check out this free report showing analyst profit forecasts.
A Different Perspective
It's good to see that Mohawk Industries has rewarded shareholders with a total shareholder return of 119% in the last twelve months. There's no doubt those recent returns are much better than the TSR loss of 1.7% per year over five years. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Even so, be aware that Mohawk Industries is showing 1 warning sign in our investment analysis , you should know about...
We will like Mohawk Industries better if we see some big insider buys. While we wait, check out this free list of growing companies 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 US exchanges.
This article by Simply Wall St is general in nature. 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.
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