The simplest way to invest in stocks is to buy exchange traded funds. But you can significantly boost your returns by picking above-average stocks. For example, the Campbell Soup Company (NYSE:CPB) share price is up 20% in the last year, clearly besting the market return of around 6.7% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! Unfortunately the longer term returns are not so good, with the stock falling 3.6% in the last three years.
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over the last twelve months, Campbell Soup actually shrank its EPS by 2.5%.
The mild decline in EPS may be a result of the fact that the company is more focused on other aspects of the business, right now. 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 think that the revenue growth of 16% could have some investors interested. We do see some companies suppress earnings in order to accelerate revenue growth.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Campbell Soup is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Campbell Soup stock, you should check out this free report showing analyst consensus estimates for future profits.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Campbell Soup, it has a TSR of 23% for the last year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that Campbell Soup shareholders have received a total shareholder return of 23% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 3.6% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Campbell Soup better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with Campbell Soup .
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.
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. 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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