EMS-CHEMIE HOLDING's (VTX:EMSN) earnings growth rate lags the 17% CAGR delivered to shareholders

By
Simply Wall St
Published
January 16, 2022
SWX:EMSN
Source: Shutterstock

Stock pickers are generally looking for stocks that will outperform the broader market. And in our experience, buying the right stocks can give your wealth a significant boost. To wit, the EMS-CHEMIE HOLDING share price has climbed 90% in five years, easily topping the market return of 40% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 18% , including dividends .

In light of the stock dropping 5.8% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.

Check out our latest analysis for EMS-CHEMIE HOLDING

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 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).

Over half a decade, EMS-CHEMIE HOLDING managed to grow its earnings per share at 5.1% a year. This EPS growth is slower than the share price growth of 14% 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 graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

earnings-per-share-growth
SWX:EMSN Earnings Per Share Growth January 16th 2022

It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. This free interactive report on EMS-CHEMIE HOLDING's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, EMS-CHEMIE HOLDING's TSR for the last 5 years was 117%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

EMS-CHEMIE HOLDING's TSR for the year was broadly in line with the market average, at 18%. Most would be happy with a gain, and it helps that the year's return is actually better than the average return over five years, which was 17%. Even if the share price growth slows down from here, there's a good chance that this is business worth watching in the long term. Before deciding if you like the current share price, check how EMS-CHEMIE HOLDING scores on these 3 valuation metrics.

But note: EMS-CHEMIE HOLDING may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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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