Home / Stocks / Introducing Varian Medical Systems (NYSE:VAR), The Stock That Dropped 29% In The Last Year

Introducing Varian Medical Systems (NYSE:VAR), The Stock That Dropped 29% In The Last Year

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="This week we saw the strongVarian Medical Systems, Inc./strong (a target=_blank href=https://simplywall.st/stocks/us/healthcare/nyse-var/varian-medicalsystems?utm_medium=finance_useramp;utm_campaign=introamp;utm_source=yahooamp;blueprint=1149478 rel=nofollow noopenerNYSE:VAR/a) share price climb by 12%. But that doesn’t change the reality of under-performance over the last twelve months. After all, the share price is down 29% in the last year, significantly under-performing the market.” data-reactid=”28″>This week we saw the Varian Medical Systems, Inc. (NYSE:VAR) share price climb by 12%. But that doesn’t change the reality of under-performance over the last twelve months. After all, the share price is down 29% in the last year, significantly under-performing the market.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="span class=veryHighlightLinka target=_blank href=https://simplywall.st/stocks/us/healthcare/nyse-var/varian-medicalsystems?utm_medium=finance_useramp;utm_campaign=ctaamp;utm_source=yahooamp;blueprint=1149478 rel=nofollow noopener View our latest analysis for Varian Medical Systems /a/span” data-reactid=”29″> View our latest analysis for Varian Medical Systems

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="In his essay emThe Superinvestors of Graham-and-Doddsville/em Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.” data-reactid=”30″>In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Unfortunately Varian Medical Systems reported an EPS drop of 24% for the last year. This proportional reduction in earnings per share isn’t far from the 29% decrease in the share price. Given the lower EPS we might have expected investors to lose confidence in the stock, but that doesn’t seemed to have happened. Rather, the share price is remains a similar multiple of the EPS, suggesting the outlook remains the same.” data-reactid=”31″>Unfortunately Varian Medical Systems reported an EPS drop of 24% for the last year. This proportional reduction in earnings per share isn’t far from the 29% decrease in the share price. Given the lower EPS we might have expected investors to lose confidence in the stock, but that doesn’t seemed to have happened. Rather, the share price is remains a similar multiple of the EPS, suggesting the outlook remains the same.

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

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="This strongfree/strong interactive report on Varian Medical Systems‘s a target=_blank href=https://simplywall.st/stocks/us/healthcare/nyse-var/varian-medicalsystems?utm_medium=finance_useramp;utm_campaign=integrated-pitchamp;utm_source=yahooamp;blueprint=1149478#past rel=nofollow noopenerearnings, revenue and cash flow/a is a great place to start, if you want to investigate the stock further.” data-reactid=”45″>This free interactive report on Varian Medical Systems‘s earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What about the Total Shareholder Return (TSR)?<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Investors should note that there's a difference between Varian Medical Systems‘s total shareholder return (TSR) and its share price change, which we’ve covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. We note that Varian Medical Systems‘s TSR, at -29% is higher than its share price return of -29%. When you consider it hasn’t been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.” data-reactid=”47″>Investors should note that there’s a difference between Varian Medical Systems‘s total shareholder return (TSR) and its share price change, which we’ve covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. We note that Varian Medical Systems‘s TSR, at -29% is higher than its share price return of -29%. When you consider it hasn’t been paying a dividend, this data suggests shareholders have benefitted from a spin-off, or had the opportunity to acquire attractively priced shares in a discounted capital raising.

A Different Perspective<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="We regret to report that Varian Medical Systems shareholders are down 29% for the year. Unfortunately, that’s worse than the broader market decline of 11%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Longer term investors wouldn’t be so upset, since they would have made 3.8%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Consider for instance, the ever-present spectre of investment risk. a target=_blank href=https://simplywall.st/stocks/us/healthcare/nyse-var/varian-medicalsystems?utm_medium=finance_useramp;utm_campaign=integrated-pitchamp;utm_source=yahooamp;blueprint=1149478#executive-summary rel=nofollow noopener strong We’ve identified 3 warning signs /strong with Varian Medical Systems /a, and understanding them should be part of your investment process.” data-reactid=”49″>We regret to report that Varian Medical Systems shareholders are down 29% for the year. Unfortunately, that’s worse than the broader market decline of 11%. However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there’s a good opportunity. Longer term investors wouldn’t be so upset, since they would have made 3.8%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Consider for instance, the ever-present spectre of investment risk. We’ve identified 3 warning signs with Varian Medical Systems , and understanding them should be part of your investment process.

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.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.

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