By buying an index fund, you can easily get a return that is roughly the same as the market return. But by picking the right individual stocks, you can get a return that is even greater. For example, Garrett Motion (NASDAQ:GTX) shares have risen 21% over the past three years, clearly outperforming the market return of about 13% (not including dividends). However, more recent returns have been less impressive, with the stock returning only 11% last year.
The stock has added $81 million to its market cap in the past week alone, so let's take a look at whether fundamental performance is driving long-term returns.
See our latest analysis for Garrett Motion
To paraphrase Benjamin Graham, “In the short run, the market is a voting machine, but in the long run, it's a weighing machine.” By comparing earnings per share (EPS) and share price changes over time, we can get a sense of how investor attitudes to a company have changed over time.
In the three years that the share price has risen, Garrett Motion has gone from a loss to a profit, so we expect the share price to rise further over this period.
The image below shows how EPS has changed over time (if you click on the image you can see greater detail).
NasdaqGS:GTX Earnings Per Share Growth Rate August 28, 2024
We know Garrett Motion has improved its profits recently, but will revenue grow? This free report showing analyst profit forecasts can help you determine if the EPS growth is sustainable.
A different perspective
Garrett Motion shareholders have earned a total return of 11% over the year, however this falls short of the market average. But at least it's still a gain. Over five years, the TSR is down 2% per year, so this could be a sign that the business is turning around. I find it very interesting to look at share price performance over the long term as a proxy for business performance. However, to gain real insight, you need to consider other information as well. To that end, you should be aware of the 2 warning signs we've spotted for Garrett Motion.
Garrett Motion would become even more attractive if we saw some significant insider buying. While we wait, check out this free list of undervalued stocks (mostly small-cap stocks) that have seen significant, 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.
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This article by Simply Wall St is of general nature. We provide commentary based on historical data and analyst forecasts using only unbiased methodology, and our articles are not intended as financial advice. It is not a recommendation to buy or sell a stock, and does not take into account your objectives or financial situation. We aim to provide long-term analysis driven by fundamental data. Please note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any of the stocks mentioned herein.
