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The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. But Mondelez International, Inc. (NASDAQ:MDLZ) has fallen short of that second goal, with a share price rise of 20% over five years, which is below the market return. Unfortunately the share price is down 3.9% in the last year.
Although Mondelez International has shed US$3.1b from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).
Over half a decade, Mondelez International managed to grow its earnings per share at 5.6% a year. The EPS growth is more impressive than the yearly share price gain of 4% over the same period. Therefore, it seems the market has become relatively pessimistic about the company.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It might be well worthwhile taking a look at our free report on Mondelez International'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. 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 Mondelez International the TSR over the last 5 years was 35%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
While it's never nice to take a loss, Mondelez International shareholders can take comfort that , including dividends,their trailing twelve month loss of 1.2% wasn't as bad as the market loss of around 2.4%. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. It's always interesting to track share price performance over the longer term. But to understand Mondelez International better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Mondelez International .