EssilorLuxottica Société anonyme (EPA:EL) shareholders have earned a 12% CAGR over the last five years

When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, the EssilorLuxottica Société anonyme (EPA:EL) share price is up 67% in the last 5 years, clearly besting the market return of around 48% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 5.5% , including dividends .

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

View our latest analysis for EssilorLuxottica Société anonyme

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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 half decade, EssilorLuxottica Société anonyme became profitable. That's generally thought to be a genuine positive, so we would expect to see an increasing share price.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

It is of course excellent to see how EssilorLuxottica Société anonyme has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

What About Dividends?

When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of EssilorLuxottica Société anonyme, it has a TSR of 79% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

EssilorLuxottica Société anonyme provided a TSR of 5.5% over the year (including dividends). That's fairly close to the broader market return. It has to be noted that the recent return falls short of the 12% shareholders have gained each year, over half a decade. Although the share price growth has slowed, the longer term story points to a business well worth watching. Before deciding if you like the current share price, check how EssilorLuxottica Société anonyme scores on these 3 valuation metrics.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on French 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.