One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. Just take a look at CPH Chemie + Papier Holding AG (VTX:CPHN), which is up 37%, over three years, soundly beating the market decline of 4.7% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 1.2% , including dividends .
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 CPH Chemie + Papier Holding
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.
During three years of share price growth, CPH Chemie + Papier Holding achieved compound earnings per share growth of 19% per year. This EPS growth is higher than the 11% average annual increase in the share price. So it seems investors have become more cautious about the company, over time. We'd venture the lowish P/E ratio of 6.54 also reflects the negative sentiment around the stock.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
This free interactive report on CPH Chemie + Papier Holding's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of CPH Chemie + Papier Holding, it has a TSR of 54% for the last 3 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's good to see that CPH Chemie + Papier Holding has rewarded shareholders with a total shareholder return of 1.2% in the last twelve months. And that does include the dividend. Having said that, the five-year TSR of 4% a year, is even better. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Take risks, for example - CPH Chemie + Papier Holding has 2 warning signs (and 1 which is concerning) we think you should know about.