Stock pickers are generally looking for stocks that will outperform the broader market. And the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the Schindler Holding AG (VTX:SCHN) share price is up 77% in the last 5 years, clearly besting the market return of around 27% (ignoring dividends). On the other hand, the more recent gains haven’t been so impressive, with shareholders gaining just 20% , including dividends .
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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).
During the last half decade, Schindler Holding became profitable. That would generally be considered a positive, so we’d expect the share price to be up.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Dive deeper into Schindler Holding’s key metrics by checking this interactive graph of Schindler Holding’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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Schindler Holding’s TSR for the last 5 years was 96%, which exceeds the share price return mentioned earlier. And there’s no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Schindler Holding shareholders gained a total return of 20% during the year. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 14% per year over five year. It is possible that returns will improve along with the business fundamentals. It’s always interesting to track share price performance over the longer term. But to understand Schindler Holding better, we need to consider many other factors. Case in point: We’ve spotted 1 warning sign for Schindler Holding you should be aware of.
If you would prefer to check out another company — one with potentially superior financials — then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on CH exchanges.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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