Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. To wit, the Heineken share price has climbed 84% in five years, easily topping the market return of 31% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 8.5%, including dividends.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, Heineken achieved compound earnings per share (EPS) growth of 7.1% per year. This EPS growth is slower than the share price growth of 13% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Heineken's key metrics by checking this interactive graph of Heineken's earnings, revenue and cash flow .
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Heineken the TSR over the last 5 years was 100%, 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
It's good to see that Heineken has rewarded shareholders with a total shareholder return of 8.5% in the last twelve months. That's including the dividend. However, that falls short of the 15% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
But note: Heineken 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 NL exchanges.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com . This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.