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Investing in Chemours (NYSE:CC) three years ago would have delivered you a 130% gain

The Chemours Company (NYSE:CC) shareholders might be concerned after seeing the share price drop 12% in the last quarter. But that doesn’t change the fact that the returns over the last three years have been very strong. In three years the stock price has launched 103% higher: a great result. After a run like that some may not be surprised to see prices moderate. The fundamental business performance will ultimately dictate whether the top is in, or if this is a stellar buying opportunity.

So let’s assess the underlying fundamentals over the last 3 years and see if they’ve moved in lock-step with shareholder returns.

Check out the opportunities and risks within the US Chemicals industry.

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

During three years of share price growth, Chemours achieved compound earnings per share growth of 35% per year. The average annual share price increase of 27% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 5.46.

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
NYSE:CC Earnings Per Share Growth November 24th 2022

We know that Chemours has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on Chemours’ balance sheet strength is a great place to start, if you want to investigate the stock further.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Chemours the TSR over the last 3 years was 130%, which is better than the share price return mentioned above. And there’s no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It’s nice to see that Chemours shareholders have received a total shareholder return of 4.1% over the last year. And that does include the dividend. That certainly beats the loss of about 4% per year over the last half decade. We generally put more weight on the long term performance over the short term, but the recent improvement could hint at a (positive) inflection point within the business. It’s always interesting to track share price performance over the longer term. But to understand Chemours better, we need to consider many other factors. Consider risks, for instance. Every company has them, and we’ve spotted 2 warning signs for Chemours you should know about.

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.

Valuation is complex, but we’re helping make it simple.

Find out whether Chemours is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.

View the Free Analysis

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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