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Optimism for Bodycote (LON:BOY) has grown this past week, despite three-year decline in earnings

Simply Wall St · 1d ago

Low-cost index funds make it easy to achieve average market returns. But across the board there are plenty of stocks that underperform the market. That's what has happened with the Bodycote plc (LON:BOY) share price. It's up 25% over three years, but that is below the market return. In the last year the stock has gained 8.9%.

The past week has proven to be lucrative for Bodycote investors, so let's see if fundamentals drove the company's three-year performance.

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While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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 three years, Bodycote failed to grow earnings per share, which fell 20% (annualized).

So we doubt that the market is looking to EPS for its main judge of the company's value. Given this situation, it makes sense to look at other metrics too.

Do you think that shareholders are buying for the 1.7% per annum revenue growth trend? We don't. So truth be told we can't see an easy explanation for the share price action, but perhaps you can...

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

earnings-and-revenue-growth
LSE:BOY Earnings and Revenue Growth December 16th 2025

You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Bodycote the TSR over the last 3 years was 40%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Bodycote shareholders gained a total return of 14% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 3% per year over five year. It is possible that returns will improve along with the business fundamentals. 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. Even so, be aware that Bodycote is showing 3 warning signs in our investment analysis , you should know about...

If you are like me, then you will not want to miss this free list of undervalued small caps 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 British exchanges.