If we combine the above two graphs, we find the Earnings and Price Correlated F.A.S.T. Graph below. Note that at the beginning of the period the price was much higher than justified earnings, in the middle price more or less followed earnings, after the most recent recession shares were trading at a bit of a discount, and today the stock price has matched up almost perfectly with the underlying earnings of the company.
From this graph is an important lesson. At the beginning of the period, shares of Kroger were trading at roughly 30 times earnings as compared to the price-to-earnings ratio closer to 15 today. Consequently, the performance results of the company greatly trailed the business results. Kroger was able to grow operating earnings by about 7% a year while the investor only received returns, including dividends, of roughly 2% a year.
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