Yahoo Finance Valhi (NYSE:VHI) shareholders have earned a 37% return over the last year
If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. For example, the Valhi, Inc. (NYSE:VHI) share price is up 35% in the last 1 year, clearly besting the market decline of around 2.1% (not including dividends). That's a solid performance by our standards! Having said that, the longer term returns aren't so impressive, with stock gaining just 16% in three years.
So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.
See our latest analysis for Valhi
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 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.
Valhi was able to grow EPS by 150% in the last twelve months. It's fair to say that the share price gain of 35% did not keep pace with the EPS growth. So it seems like the market has cooled on Valhi, despite the growth. Interesting. The caution is also evident in the lowish P/E ratio of 7.58.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Valhi's key metrics by checking this interactive graph of Valhi's earnings, revenue and cash flow.
A Different Perspective
It's good to see that Valhi has rewarded shareholders with a total shareholder return of 37% in the last twelve months. Of course, that includes the dividend. That certainly beats the loss of about 1.2% per year over the last half decade. This makes us a little wary, but the business might have turned around its fortunes. 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. For example, we've discovered 2 warning signs for Valhi (1 doesn't sit too well with us!) that you should be aware of before investing here.
If you are like me, then you will 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.
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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.
