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Can You Imagine How Coca-Cola Amatil's (ASX:CCL) Shareholders Feel About The 38% Share Price Increase?

Simply Wall St

The simplest way to invest in stocks is to buy exchange traded funds. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). To wit, the Coca-Cola Amatil Limited (ASX:CCL) share price is 38% higher than it was a year ago, much better than the market return of around 20% (not including dividends) in the same period. If it can keep that out-performance up over the long term, investors will do very well! Having said that, the longer term returns aren't so impressive, with stock gaining just 12% in three years.

Check out our latest analysis for Coca-Cola Amatil

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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, Coca-Cola Amatil actually shrank its EPS by 14%.

So we don't think that investors are paying too much attention to EPS. Therefore, it seems likely that investors are putting more weight on metrics other than EPS, at the moment.

We haven't seen Coca-Cola Amatil increase dividend payments yet, so the yield probably hasn't helped drive the share higher. It seems far more likely that the 5.9% boost to the revenue over the last year, is making the difference. Revenue growth often does precede earnings growth, so some investors might be willing to forgo profits today because they have their eyes fixed firmly on the future.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).

ASX:CCL Income Statement, December 30th 2019
ASX:CCL Income Statement, December 30th 2019

Coca-Cola Amatil is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. If you are thinking of buying or selling Coca-Cola Amatil 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Coca-Cola Amatil, it has a TSR of 46% for the last year. 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 Coca-Cola Amatil has rewarded shareholders with a total shareholder return of 46% in the last twelve months. And that does include the dividend. That's better than the annualised return of 9.6% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Importantly, we haven't analysed Coca-Cola Amatil's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.

But note: Coca-Cola Amatil may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on AU 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.