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If You Had Bought Givaudan (VTX:GIVN) Stock Three Years Ago, You Could Pocket A 64% Gain Today

Simply Wall St

By buying an index fund, investors can approximate the average market return. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, the Givaudan SA (VTX:GIVN) share price is up 64% in the last three years, clearly besting the market return of around 20% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 35% , including dividends .

View our latest analysis for Givaudan

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.

Givaudan was able to grow its EPS at 1.0% per year over three years, sending the share price higher. This EPS growth is lower than the 18% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It's not unusual to see the market 're-rate' a stock, after a few years of growth.

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

SWX:GIVN Past and Future Earnings, January 6th 2020
SWX:GIVN Past and Future Earnings, January 6th 2020

It might be well worthwhile taking a look at our free report on Givaudan's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. In the case of Givaudan, it has a TSR of 77% for the last 3 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Givaudan has rewarded shareholders with a total shareholder return of 35% in the last twelve months. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 13% 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. Before forming an opinion on Givaudan you might want to consider these 3 valuation metrics.

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 CH 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.