Sonova Holding (VTX:SOON) Shareholders Have Enjoyed A 87% Share Price Gain

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term Sonova Holding AG (VTX:SOON) shareholders have enjoyed a 87% share price rise over the last half decade, well in excess of the market return of around 23% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 3.8%.

See our latest analysis for Sonova Holding

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 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 five years of share price growth, Sonova Holding achieved compound earnings per share (EPS) growth of 0.4% per year. This EPS growth is slower than the share price growth of 13% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

This free interactive report on Sonova Holding's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

What about the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Sonova Holding's total shareholder return (TSR) and its share price change, which we've covered above. 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. Sonova Holding's TSR of 98% for the 5 years exceeded its share price return, because it has paid dividends.

A Different Perspective

Sonova Holding's TSR for the year was broadly in line with the market average, at 3.8%. It has to be noted that the recent return falls short of the 15% shareholders have gained each year, over half a decade. Although the share price growth has slowed, the longer term story points to a business well worth watching. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Take risks, for example - Sonova Holding has 2 warning signs we think you should be aware of.

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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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