Investors in Lotus Bakeries (EBR:LOTB) have seen incredible returns of 334% over the past five years

We think all investors should try to buy and hold high quality multi-year winners. While not every stock performs well, when investors win, they can win big. Just think about the savvy investors who held Lotus Bakeries NV (EBR:LOTB) shares for the last five years, while they gained 321%. And this is just one example of the epic gains achieved by some long term investors.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for Lotus Bakeries

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).

During five years of share price growth, Lotus Bakeries achieved compound earnings per share (EPS) growth of 14% per year. This EPS growth is slower than the share price growth of 33% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth. This optimism is visible in its fairly high P/E ratio of 61.67.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

We know that Lotus Bakeries has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Lotus Bakeries will grow revenue in the future.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Lotus Bakeries, it has a TSR of 334% for the last 5 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 Lotus Bakeries has rewarded shareholders with a total shareholder return of 31% in the last twelve months. Of course, that includes the dividend. However, the TSR over five years, coming in at 34% per year, is even more impressive. Before deciding if you like the current share price, check how Lotus Bakeries scores on these 3 valuation metrics.

We will like Lotus Bakeries better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Belgian exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com