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Chubb (NYSE:CB) Shareholders Booked A 36% Gain In The Last Five Years

Simply Wall St

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you'd generally like to see the share price rise faster than the market Unfortunately for shareholders, while the Chubb Limited (NYSE:CB) share price is up 36% in the last five years, that's less than the market return. Zooming in, the stock is up a respectable 15% in the last year.

Check out our latest analysis for Chubb

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.

During five years of share price growth, Chubb actually saw its EPS drop 4.0% per year.

By glancing at these numbers, we'd posit that the decline in earnings per share is not representative of how the business has changed over the years. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

We doubt the modest 2.0% dividend yield is attracting many buyers to the stock. On the other hand, Chubb's revenue is growing nicely, at a compound rate of 13% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

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

NYSE:CB Income Statement, January 19th 2020
NYSE:CB Income Statement, January 19th 2020

Chubb is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for Chubb in this interactive graph of future profit estimates.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Chubb, it has a TSR of 52% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Chubb shareholders are up 17% for the year (even including dividends) . Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it's actually better than the average return of 8.7% over half a decade This could indicate that the company is winning over new investors, as it pursues its strategy. Before spending more time on Chubb it might be wise to click here to see if insiders have been buying or selling shares.

We will like Chubb better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

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.