Yahoo Finance While shareholders of EMS-CHEMIE HOLDING (VTX:EMSN) are in the red over the last three years, underlying earnings have actually grown
As an investor its worth striving to ensure your overall portfolio beats the market average. But its virtually certain that sometimes you will buy stocks that fall short of the market average returns. We regret to report that long term EMS-CHEMIE HOLDING AG (VTX:EMSN) shareholders have had that experience, with the share price dropping 25% in three years, versus a market decline of about 7.1%. Shareholders have had an even rougher run lately, with the share price down 12% in the last 90 days. Of course, this share price action may well have been influenced by the 7.2% decline in the broader market, throughout the period.
Although the past week has been more reassuring for shareholders, they're still in the red over the last three years, so let's see if the underlying business has been responsible for the decline.
View our latest analysis for EMS-CHEMIE HOLDING
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 unfortunate three years of share price decline, EMS-CHEMIE HOLDING actually saw its earnings per share (EPS) improve by 2.8% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.
It looks to us like the market was probably too optimistic around growth three years ago. However, taking a look at other business metrics might shed a bit more light on the share price action.
We note that, in three years, revenue has actually grown at a 10% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating EMS-CHEMIE HOLDING further; while we may be missing something on this analysis, there might also be an opportunity.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
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. If you are thinking of buying or selling EMS-CHEMIE HOLDING stock, you should check out this free report showing analyst profit forecasts.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for EMS-CHEMIE HOLDING the TSR over the last 3 years was -20%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's good to see that EMS-CHEMIE HOLDING has rewarded shareholders with a total shareholder return of 3.5% in the last twelve months. Of course, that includes the dividend. Having said that, the five-year TSR of 5% a year, is even better. It's always interesting to track share price performance over the longer term. But to understand EMS-CHEMIE HOLDING better, we need to consider many other factors. For instance, we've identified 1 warning sign for EMS-CHEMIE HOLDING that you should be aware of.
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.
