Shareholders of Lonza Group (VTX:LONN) Must Be Delighted With Their 332% Total Return

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. Long term Lonza Group Ltd (VTX:LONN) shareholders would be well aware of this, since the stock is up 279% in five years.

Check out our latest analysis for Lonza Group

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.

Over half a decade, Lonza Group managed to grow its earnings per share at 23% a year. This EPS growth is slower than the share price growth of 31% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 51.46.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Lonza Group has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Lonza Group will grow revenue in the future.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Lonza Group's TSR for the last 5 years was 332%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

We're pleased to report that Lonza Group shareholders have received a total shareholder return of 62% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 34%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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 Lonza Group that you should be aware of before investing here.

Of course Lonza Group may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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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