It’s always best to build a diverse portfolio of shares, since any stock business could lag the broader market. Of course, in an ideal world, all your stocks would beat the market. Knight-Swift Transportation Holdings Inc. (NYSE:KNX) has done well over the last year, with the stock price up 16% beating the market return of 14% (not including dividends). However, the stock hasn’t done so well in the longer term, with the stock only up 6.5% in three years.
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 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.
Over the last twelve months, Knight-Swift Transportation Holdings actually shrank its EPS by 43%.
This means it’s unlikely the market is judging the company based on earnings growth. Indeed, when EPS is declining but the share price is up, it often means the market is considering other factors.
We doubt the modest 0.6% dividend yield is doing much to support the share price. Unfortunately Knight-Swift Transportation Holdings’s fell 5.0% over twelve months. So the fundamental metrics don’t provide an obvious explanation for the share price gain.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
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. This free report showing analyst forecasts should help you form a view on Knight-Swift Transportation Holdings
What about the Total Shareholder Return (TSR)?
We’ve already covered Knight-Swift Transportation Holdings’s share price action, but we should also mention its total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. Its history of dividend payouts mean that Knight-Swift Transportation Holdings’s TSR of 16% over the last year is better than the share price return.
A Different Perspective
Knight-Swift Transportation Holdings provided a TSR of 16% over the year (including dividends) . That’s fairly close to the broader market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 3.4% per year. Even if the share price growth slows down from here, there’s a good chance that this is business worth watching in the long term. If you want to research this stock further, the data on insider buying is an obvious place to start. You can click here to see who has been buying shares – and the price they paid.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
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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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.