Straumann Holding (VTX:STMN) jumps 3.3% this week, though earnings growth is still tracking behind five-year shareholder returns

Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, the Straumann Holding AG (VTX:STMN) share price is up 83% in the last 5 years, clearly besting the market return of around 14% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 8.2% in the last year , including dividends .

Since the stock has added CHF669m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Straumann 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 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, Straumann Holding achieved compound earnings per share (EPS) growth of 6.6% per year. This EPS growth is slower than the share price growth of 13% 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 55.47.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

It is of course excellent to see how Straumann Holding has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Straumann Holding's financial health with this free report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Straumann Holding, it has a TSR of 88% for the last 5 years. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's nice to see that Straumann Holding shareholders have received a total shareholder return of 8.2% over the last year. Of course, that includes the dividend. However, the TSR over five years, coming in at 13% per year, is even more impressive. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. It's always interesting to track share price performance over the longer term. But to understand Straumann Holding better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Straumann Holding , and understanding them should be part of your investment process.

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 Swiss exchanges.

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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.