Yahoo Finance EMS-CHEMIE HOLDING's (VTX:EMSN) investors will be pleased with their favorable 31% return over the last five years
When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the EMS-CHEMIE HOLDING AG (VTX:EMSN) share price is up 15% in the last five years, that's less than the market return. Zooming in, the stock is actually down 5.8% in the last year.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for EMS-CHEMIE HOLDING
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
During five years of share price growth, EMS-CHEMIE HOLDING actually saw its EPS drop 2.5% per year.
With EPS falling, but a modestly increasing share price, it seems that the market was probably too pessimistic about the stock in the past. In the long term, though, it will be hard for the share price rises to continue without improving EPS.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
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 EMS-CHEMIE HOLDING's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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 EMS-CHEMIE HOLDING the TSR over the last 5 years was 31%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
EMS-CHEMIE HOLDING shareholders are down 3.0% for the year (even including dividends), but the market itself is up 2.9%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 6% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. Is EMS-CHEMIE HOLDING cheap compared to other companies? These 3 valuation measures might help you decide.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
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.
