Investing in Chocoladefabriken Lindt & Sprüngli (VTX:LISN) five years ago would have delivered you a 43% gain
Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the Chocoladefabriken Lindt & Sprüngli share price has climbed 34% in five years, easily topping the market return of 13% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 8.5% in the last year , including dividends .
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
Check out our latest analysis for Chocoladefabriken Lindt & Sprüngli
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 five years of share price growth, Chocoladefabriken Lindt & Sprüngli achieved compound earnings per share (EPS) growth of 7.2% per year. This EPS growth is higher than the 6% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Chocoladefabriken Lindt & Sprüngli has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Chocoladefabriken Lindt & Sprüngli will grow revenue in the future.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Chocoladefabriken Lindt & Sprüngli's TSR for the last 5 years was 43%, 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
It's nice to see that Chocoladefabriken Lindt & Sprüngli shareholders have received a total shareholder return of 8.5% over the last year. Of course, that includes the dividend. That's better than the annualised return of 7% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Is Chocoladefabriken Lindt & Sprüngli cheap compared to other companies? These 3 valuation measures might help you decide.
But note: Chocoladefabriken Lindt & Sprüngli 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 Swiss exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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.
