Shareholders in Emerson Electric (NYSE:EMR) are in the red if they invested a year ago

Most people feel a little frustrated if a stock they own goes down in price. But sometimes a share price fall can have more to do with market conditions than the performance of the specific business. So while the Emerson Electric Co. (NYSE:EMR) share price is down 23% in the last year, the total return to shareholders (which includes dividends) was -21%. That’s better than the market which declined 22% over the last year. Longer term investors have fared much better, since the share price is up 12% in three years. Unfortunately the share price momentum is still quite negative, with prices down 10% in thirty days. But this could be related to poor market conditions — stocks are down 9.6% in the same time.

So let’s have a look and see if the longer term performance of the company has been in line with the underlying business’ progress.

Check out our latest analysis for Emerson Electric

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 the unfortunate twelve months during which the Emerson Electric share price fell, it actually saw its earnings per share (EPS) improve by 35%. It’s quite possible that growth expectations may have been unreasonable in the past.

It’s fair to say that the share price does not seem to be reflecting the EPS growth. So it’s easy to justify a look at some other metrics.

Emerson Electric managed to grow revenue over the last year, which is usually a real positive. Since we can’t easily explain the share price movement based on these metrics, it might be worth considering how market sentiment has changed towards the stock.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

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Emerson Electric is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts

The total return of 21% received by Emerson Electric shareholders over the last year isn’t far from the market return of -22%. The silver lining is that longer term investors would have made a total return of 6% per year over half a decade. If the stock price has been impacted by changing sentiment, rather than deteriorating business conditions, it could spell opportunity. It’s always interesting to track share price performance over the longer term. But to understand Emerson Electric better, we need to consider many other factors. For instance, we’ve identified 1 warning sign for Emerson Electric that you should be aware of.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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.

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