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Passive investing in index funds can generate returns that roughly match the overall market. But if you pick the right individual stocks, you could make more than that. For example, the Coca-Cola HBC AG (LON:CCH) share price is up 24% in the last 1 year, clearly besting the market return of around 7.4% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! However, the longer term returns haven't been so impressive, with the stock up just 15% in the last three years.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
Check out our latest analysis for Coca-Cola HBC
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 the last twelve months, Coca-Cola HBC actually shrank its EPS by 2.0%.
We don't think that the decline in earnings per share is a good measure of the business over the last twelve months. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
We think that the revenue growth of 3.4% could have some investors interested. Many businesses do go through a phase where they have to forgo some profits to drive business development, and sometimes its for the best.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
Coca-Cola HBC is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Coca-Cola HBC in this interactive graph of future profit estimates.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, Coca-Cola HBC's TSR for the last 1 year was 28%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!