Yahoo Finance Chocoladefabriken Lindt & Sprüngli (VTX:LISN) jumps 3.3% this week, though earnings growth is still tracking behind five-year shareholder returns
Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. For example, long term Chocoladefabriken Lindt & Sprüngli AG (VTX:LISN) shareholders have enjoyed a 41% share price rise over the last half decade, well in excess of the market return of around 15% (not including dividends).
Since the stock has added CHF785m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.
Check out our latest analysis for Chocoladefabriken Lindt & Sprüngli
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.
Over half a decade, Chocoladefabriken Lindt & Sprüngli managed to grow its earnings per share at 7.5% a year. This EPS growth is reasonably close to the 7% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Rather, the share price has approximately tracked EPS growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
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. We note that for Chocoladefabriken Lindt & Sprüngli the TSR over the last 5 years was 51%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
While the broader market lost about 0.9% in the twelve months, Chocoladefabriken Lindt & Sprüngli shareholders did even worse, losing 3.0% (even including dividends). 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 9%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Before forming an opinion on Chocoladefabriken Lindt & Sprüngli you might want to consider these 3 valuation metrics.
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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.
