Sonova Holding's (VTX:SOON) investors will be pleased with their favorable 62% return over the last five years
Sonova Holding AG (VTX:SOON) shareholders might be concerned after seeing the share price drop 11% in the last quarter. But that doesn't change the fact that the returns over the last five years have been pleasing. Its return of 53% has certainly bested the market return! While the long term returns are impressive, we do have some sympathy for those who bought more recently, given the 31% drop, in the last year.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
Check out our latest analysis for Sonova Holding
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During five years of share price growth, Sonova Holding achieved compound earnings per share (EPS) growth of 15% per year. The EPS growth is more impressive than the yearly share price gain of 9% over the same period. So it seems the market isn't so enthusiastic about the stock these days.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on Sonova Holding's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Sonova Holding the TSR over the last 5 years was 62%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We regret to report that Sonova Holding shareholders are down 30% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 13%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Longer term investors wouldn't be so upset, since they would have made 10%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Before deciding if you like the current share price, check how Sonova Holding scores on these 3 valuation metrics.
If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CH exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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