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When you buy a stock there is always a possibility that it could drop 100%. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For instance, the price of Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) stock is up an impressive 129% over the last five years. Also pleasing for shareholders was the 19% gain in the last three months.
The past week has proven to be lucrative for Coca-Cola FEMSA. de investors, so let's see if fundamentals drove the company's five-year performance.
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.
Over half a decade, Coca-Cola FEMSA. de managed to grow its earnings per share at 14% a year. This EPS growth is slower than the share price growth of 18% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of 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 Coca-Cola FEMSA. de has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Coca-Cola FEMSA. de's TSR for the last 5 years was 185%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Coca-Cola FEMSA. de shareholders are down 0.8% for the year (even including dividends), but the market itself is up 7.3%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 23% 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. Importantly, we haven't analysed Coca-Cola FEMSA. de's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.