On average, over time, stock markets tend to rise higher. This makes investing attractive. But if when you choose to buy stocks, some of them will be below average performers. Over the last year the Kimberly-Clark Corporation (NYSE:KMB) share price is up 13%, but that's less than the broader market return. However, the stock hasn't done so well in the longer term, with the stock only up 2.2% in three years.

Since the stock has added US$1.5b to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Kimberly-Clark

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

Kimberly-Clark was able to grow EPS by 45% in the last twelve months. This EPS growth is significantly higher than the 13% increase in the share price. So it seems like the market has cooled on Kimberly-Clark, despite the growth. Interesting.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Kimberly-Clark has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Kimberly-Clark's TSR for the last 1 year was 17%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Kimberly-Clark provided a TSR of 17% over the last twelve months. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 2% 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 Kimberly-Clark is showing 1 warning sign in our investment analysis , you should know about...

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: many of them are unnoticed AND have attractive valuation).

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

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