Bachem Holding's (VTX:BANB) earnings growth rate lags the 11% CAGR delivered to shareholders

Bachem Holding AG (VTX:BANB) shareholders might be concerned after seeing the share price drop 18% in the last quarter. Looking further back, the stock has generated good profits over five years. It has returned a market beating 62% in that time. While the returns over the last 5 years have been good, we do feel sorry for those shareholders who haven't held shares that long, because the share price is down 48% in the last three years.

Although Bachem Holding has shed CHF154m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for Bachem 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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.

During five years of share price growth, Bachem Holding achieved compound earnings per share (EPS) growth of 15% per year. The EPS growth is more impressive than the yearly share price gain of 10% over the same period. So it seems the market isn't so enthusiastic about the stock these days.

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

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Bachem Holding the TSR over the last 5 years was 70%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in Bachem Holding had a tough year, with a total loss of 19% (including dividends), against a market gain of about 14%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 11% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 1 warning sign for Bachem Holding that you should be aware of before investing here.

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 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.