Rocky Brands' (NASDAQ:RCKY) one-year total shareholder returns outpace the underlying earnings growth

Simply Wall St · 10/25/2024 10:27

It hasn't been the best quarter for Rocky Brands, Inc. (NASDAQ:RCKY) shareholders, since the share price has fallen 28% in that time. Despite this, the stock is a strong performer over the last year, no doubt about that. During that period, the share price soared a full 106%. So it is important to view the recent reduction in price through that lense. More important, going forward, is how the business itself is going.

In light of the stock dropping 11% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive one-year return.

See our latest analysis for Rocky Brands

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Rocky Brands was able to grow EPS by 62% in the last twelve months. The share price gain of 106% certainly outpaced the EPS growth. This indicates that the market is now more optimistic about the stock.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

earnings-per-share-growth
NasdaqGS:RCKY Earnings Per Share Growth October 25th 2024

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on Rocky Brands' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Rocky Brands the TSR over the last 1 year was 110%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Rocky Brands has rewarded shareholders with a total shareholder return of 110% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 1.4% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 3 warning signs for Rocky Brands (2 are potentially serious) that you should be aware of.

If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.