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Introducing Colgate-Palmolive (NYSE:CL), A Stock That Climbed 10% In The Last Year

Simply Wall St

There's no doubt that investing in the stock market is a truly brilliant way to build wealth. But if when you choose to buy stocks, some of them will be below average performers. Unfortunately for shareholders, while the Colgate-Palmolive Company (NYSE:CL) share price is up 10% in the last year, that falls short of the market return. However, the longer term returns haven't been so impressive, with the stock up just 3.4% in the last three years.

See our latest analysis for Colgate-Palmolive

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.

During the last year Colgate-Palmolive grew its earnings per share (EPS) by 12%. This EPS growth is reasonably close to the 10% increase in the share price. So this implies that investor expectations of the company have remained pretty steady. It makes intuitive sense that the share price and EPS would grow at similar rates.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

NYSE:CL Past and Future Earnings, December 19th 2019

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on Colgate-Palmolive'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. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Colgate-Palmolive's TSR for the last year was 13%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Colgate-Palmolive shareholders gained a total return of 13% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 1.7% per year over five year. This suggests the company might be improving over time. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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.