Carpenter Technology (NYSE:CRS) rises 4.6% this week, taking one-year gains to 56%

If you want to compound wealth in the stock market, you can do so by buying an index fund. But investors can boost returns by picking market-beating companies to own shares in. To wit, the Carpenter Technology Corporation (NYSE:CRS) share price is 52% higher than it was a year ago, much better than the market decline of around 15% (not including dividends) in the same period. That's a solid performance by our standards! In contrast, the longer term returns are negative, since the share price is 20% lower than it was three years ago.

On the back of a solid 7-day performance, let's check what role the company's fundamentals have played in driving long term shareholder returns.

Our analysis indicates that CRS is potentially undervalued!

Because Carpenter Technology made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. That's because fast revenue growth can be easily extrapolated to forecast profits, often of considerable size.

Over the last twelve months, Carpenter Technology's revenue grew by 31%. That's a fairly respectable growth rate. While the share price performed well, gaining 52% over twelve months, you could argue the revenue growth warranted it. If revenue stays on trend, there may be plenty more share price gains to come. But it's crucial to check profitability and cash flow before forming a view on the future.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

If you are thinking of buying or selling Carpenter Technology stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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 Carpenter Technology the TSR over the last 1 year was 56%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Carpenter Technology shareholders have received a total shareholder return of 56% over one year. And that does include the dividend. That certainly beats the loss of about 1.4% 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. 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. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Carpenter Technology , and understanding them should be part of your investment process.

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 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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