Zug Estates Holding's (VTX:ZUGN) 265% YoY earnings expansion surpassed the shareholder returns over the past year

Passive investing in index funds can generate returns that roughly match the overall market. But if you pick the right individual stocks, you could make more than that. For example, the Zug Estates Holding AG (VTX:ZUGN) share price is up 27% in the last 1 year, clearly besting the market return of around 6.0% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! However, the stock hasn't done so well in the longer term, with the stock only up 1.3% in three years.

Since the stock has added CHF56m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

Check out our latest analysis for Zug Estates Holding

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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.

Zug Estates Holding was able to grow EPS by 265% in the last twelve months. This EPS growth is significantly higher than the 27% increase in the share price. Therefore, it seems the market isn't as excited about Zug Estates Holding as it was before. This could be an opportunity.

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

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. Dive deeper into the earnings by checking this interactive graph of Zug Estates Holding's earnings, revenue and cash flow.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Zug Estates Holding, it has a TSR of 30% for the last 1 year. That exceeds its share price return that we previously mentioned. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

We're pleased to report that Zug Estates Holding shareholders have received a total shareholder return of 30% over one year. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 0.8% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we've discovered 3 warning signs for Zug Estates Holding (2 make us uncomfortable!) that you should be aware of before investing here.

We will like Zug Estates Holding better if we see some big insider buys. While we wait, check out this free list of undervalued stocks (mostly small caps) with considerable, recent, insider buying.

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.