Earnings grew faster than the 5.8% CAGR delivered to Westinghouse Air Brake Technologies (NYSE:WAB) shareholders over the last three years – Simply Wall St

Investors can buy low cost index fund if they want to receive the average market return. But if you invest in individual stocks, some are likely to underperform. That's what has happened with the Westinghouse Air Brake Technologies Corporation (NYSE:WAB) share price. It's up 16% over three years, but that is below the market return. Zooming in, the stock is actually down 1.7% in the last year.
Although Westinghouse Air Brake Technologies has shed US$960m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
However if you'd rather see where the opportunities and risks are within WAB's industry, you can check out our analysis on the US Machinery industry.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Westinghouse Air Brake Technologies was able to grow its EPS at 25% per year over three years, sending the share price higher. The average annual share price increase of 5% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
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. Dive deeper into the earnings by checking this interactive graph of Westinghouse Air Brake Technologies' earnings, revenue and cash flow.
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Westinghouse Air Brake Technologies, it has a TSR of 18% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
Although it hurts that Westinghouse Air Brake Technologies returned a loss of 1.1% in the last twelve months, the broader market was actually worse, returning a loss of 17%. Longer term investors wouldn't be so upset, since they would have made 3%, each year, over five years. It could be that the business is just facing some short term problems, but shareholders should keep a close eye on the fundamentals. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
There are plenty of other companies that have insiders buying up shares. You probably do not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.
Find out whether Westinghouse Air Brake Technologies is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.
Westinghouse Air Brake Technologies Corporation provides technology-based equipment, systems, and services for the freight rail and passenger transit industries worldwide.
The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.
Read more about these checks in the individual report sections or in our analysis model.
Solid track record with excellent balance sheet.
Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.
Westinghouse Air Brake Technologies Corporation provides technology-based equipment, systems, and services for the freight rail and passenger transit industries worldwide.
The Snowflake is a visual investment summary with the score of each axis being calculated by 6 checks in 5 areas.
Read more about these checks in the individual report sections or in our analysis model.
Solid track record with excellent balance sheet.
Simply Wall Street Pty Ltd (ACN 600 056 611), is a Corporate Authorised Representative (Authorised Representative Number: 467183) of Sanlam Private Wealth Pty Ltd (AFSL No. 337927). Any advice contained in this website is general advice only and has been prepared without considering your objectives, financial situation or needs. You should not rely on any advice and/or information contained in this website and before making any investment decision we recommend that you consider whether it is appropriate for your situation and seek appropriate financial, taxation and legal advice. Please read our Financial Services Guide before deciding whether to obtain financial services from us.

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