Compañía Cervecerías Unidas' (SNSE:CCU) underlying earnings growth outpaced the respectable return generated for shareholders over the past year

By
Simply Wall St
Published
October 16, 2021
SNSE:CCU
Source: Shutterstock

Compañía Cervecerías Unidas S.A. (SNSE:CCU) shareholders might be concerned after seeing the share price drop 13% in the last quarter. While that might be a setback, it doesn't negate the nice returns received over the last twelve months. In that time we've seen the stock easily surpass the market return, with a gain of 36%.

While this past week has detracted from the company's one-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

View our latest analysis for Compañía Cervecerías Unidas

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last year Compañía Cervecerías Unidas grew its earnings per share (EPS) by 63%. This EPS growth is significantly higher than the 36% increase in the share price. So it seems like the market has cooled on Compañía Cervecerías Unidas, despite the growth. Interesting.

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

earnings-per-share-growth
SNSE:CCU Earnings Per Share Growth October 17th 2021

We know that Compañía Cervecerías Unidas has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Compañía Cervecerías Unidas the TSR over the last 1 year was 41%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

We're pleased to report that Compañía Cervecerías Unidas shareholders have received a total shareholder return of 41% over one year. And that does include the dividend. That's better than the annualised return of 2% 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. 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 2 warning signs for Compañía Cervecerías Unidas that you should be aware of before investing here.

Of course Compañía Cervecerías Unidas 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 CL exchanges.

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