Shareholders Of Givaudan (VTX:GIVN) Must Be Happy With Their 123% Total Return

Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. For example, long term Givaudan SA (VTX:GIVN) shareholders have enjoyed a 95% share price rise over the last half decade, well in excess of the market return of around 33% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 12% , including dividends .

View our latest analysis for Givaudan

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 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.

Over half a decade, Givaudan managed to grow its earnings per share at 3.5% a year. This EPS growth is lower than the 14% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 45.35.

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

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

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Givaudan, it has a TSR of 123% 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 Givaudan has rewarded shareholders with a total shareholder return of 12% in the last twelve months. Of course, that includes the dividend. However, that falls short of the 17% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. It's always interesting to track share price performance over the longer term. But to understand Givaudan better, we need to consider many other factors. Even so, be aware that Givaudan is showing 1 warning sign in our investment analysis , you should know about...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will 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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