If You Had Bought Raytheon Technologies (NYSE:RTX) Shares A Year Ago You'd Have Earned 32% Returns
We believe investing is smart because history shows that stock markets go higher in the long term. But if when you choose to buy stocks, some of them will be below average performers. For example, the Raytheon Technologies Corporation (NYSE:RTX), share price is up over the last year, but its gain of 32% trails the market return. On the other hand, longer term shareholders have had a tougher run, with the stock falling 31% in three years.
See our latest analysis for Raytheon Technologies
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.
During the last year Raytheon Technologies saw its earnings per share (EPS) drop below zero. While this may prove temporary, we'd consider it a negative, so we would not have expected to see the share price up. We might get a clue to explain the share price move by looking to other metrics.
We think that the revenue growth of 32% could have some investors interested. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
We like that insiders have been buying shares in the last twelve months. Even so, future earnings will be far more important to whether current shareholders make money. If you are thinking of buying or selling Raytheon Technologies stock, you should check out this free report showing analyst profit forecasts.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Raytheon Technologies' TSR for the last year was 36%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Raytheon Technologies shareholders are up 36% for the year (even including dividends). Unfortunately this falls short of the market return. The silver lining is that the gain was actually better than the average annual return of 11% per year over five year. This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Raytheon Technologies better, we need to consider many other factors. Even so, be aware that Raytheon Technologies is showing 3 warning signs in our investment analysis , and 1 of those is concerning...
Raytheon Technologies is not the only stock insiders are buying. So take a peek at this free list of growing companies with 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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