Galenica (VTX:GALE) Shareholders Have Enjoyed A 25% Share Price Gain

By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. For example, Galenica AG (VTX:GALE) shareholders have seen the share price rise 25% over three years, well in excess of the market return (5.7%, not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 0.3% in the last year , including dividends .

View our latest analysis for Galenica

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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.

During three years of share price growth, Galenica achieved compound earnings per share growth of 7.2% per year. We don't think it is entirely coincidental that the EPS growth is reasonably close to the 8% average annual increase in the share price. This suggests that sentiment and expectations have not changed drastically. Rather, the share price has approximately tracked EPS growth.

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

Dive deeper into Galenica's key metrics by checking this interactive graph of Galenica's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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 Galenica the TSR over the last 3 years was 37%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Galenica shareholders are up 0.3% for the year (even including dividends). While you don't go broke making a profit, this return was actually lower than the average market return of about 4.9%. But the (superior) three-year TSR of 11% per year is some consolation. Even the best companies don't see strong share price performance every year. It's always interesting to track share price performance over the longer term. But to understand Galenica better, we need to consider many other factors. Even so, be aware that Galenica is showing 2 warning signs in our investment analysis , you should know about...

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.

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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. 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.
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