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These days it’s easy to simply buy an index fund, and your returns should (roughly) match the market. But you can significantly boost your returns by picking above-average stocks. For example, the Roche Holding AG (VTX:ROG) share price is up 26% in the last year, clearly besting than the market return of around 7.7% (not including dividends). So that should have shareholders smiling. Having said that, the longer term returns aren’t so impressive, with stock gaining just 15% in three years.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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 the last year Roche Holding grew its earnings per share (EPS) by 21%. This EPS growth is reasonably close to the 26% increase in the share price. So this implies that investor expectations of the company have remained pretty steady. It looks like the share price is responding to the EPS.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that Roche Holding has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
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. We note that for Roche Holding the TSR over the last year was 30%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It’s good to see that Roche Holding has rewarded shareholders with a total shareholder return of 30% in the last twelve months. Of course, that includes the dividend. That’s better than the annualised return of 4.4% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Keeping this in mind, a solid next step might be to take a look at Roche Holding’s dividend track record. This free interactive graph is a great place to start.
Of course Roche Holding 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at email@example.com. 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. Simply Wall St has no position in the stocks mentioned. Thank you for reading.