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It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But in contrast you can make much more than 100% if the company does well. For example, the Crown Holdings, Inc. (NYSE:CCK) share price has soared 125% in the last three years. How nice for those who held the stock! Then again, the 9.3% share price decline hasn't been so fun for shareholders.
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 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).
During three years of share price growth, Crown Holdings achieved compound earnings per share growth of 32% per year. Notably, the 31% average annual share price gain matches up nicely with the EPS growth rate. This suggests that sentiment and expectations have not changed drastically. Quite to the contrary, the share price has arguably reflected the EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It is of course excellent to see how Crown Holdings 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.
A Different Perspective
It's nice to see that Crown Holdings shareholders have received a total shareholder return of 44% over the last year. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 14% 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. It's always interesting to track share price performance over the longer term. But to understand Crown Holdings better, we need to consider many other factors. For instance, we've identified 3 warning signs for Crown Holdings (2 can't be ignored) that you should be aware of.
Of course Crown Holdings may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
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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