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By buying an index fund, investors can approximate the average market return. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. Just take a look at Coca-Cola Europacific Partners PLC (AMS:CCEP), which is up 54%, over three years, soundly beating the market decline of 6.7% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 33% in the last year, including dividends.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for Coca-Cola Europacific Partners
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. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During three years of share price growth, Coca-Cola Europacific Partners achieved compound earnings per share growth of 37% per year. The average annual share price increase of 15% is actually lower than the EPS growth. Therefore, it seems the market has moderated its expectations for growth, somewhat.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how Coca-Cola Europacific Partners has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Coca-Cola Europacific Partners the TSR over the last 3 years was 71%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that Coca-Cola Europacific Partners shareholders have received a total shareholder return of 33% over the last year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 12% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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. Even so, be aware that Coca-Cola Europacific Partners is showing 3 warning signs in our investment analysis , you should know about...