Update: Zotefoams (LON:ZTF) Stock Gained 33% In The Last Five Years

Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the Zotefoams plc (LON:ZTF) share price is up 33% in the last 5 years, clearly besting the market return of around 18% (ignoring dividends).

See our latest analysis for Zotefoams

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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).

Over half a decade, Zotefoams managed to grow its earnings per share at 4.5% a year. This EPS growth is slower than the share price growth of 6% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Dive deeper into Zotefoams' key metrics by checking this interactive graph of Zotefoams'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. 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Zotefoams the TSR over the last 5 years was 42%, 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

While it's certainly disappointing to see that Zotefoams shares lost 3.4% throughout the year, that wasn't as bad as the market loss of 3.8%. Of course, the long term returns are far more important and the good news is that over five years, the stock has returned 7% for each year. In the best case scenario the last year is just a temporary blip on the journey to a brighter future. It's always interesting to track share price performance over the longer term. But to understand Zotefoams better, we need to consider many other factors. For example, we've discovered 1 warning sign for Zotefoams that you should be aware of before investing here.

But note: Zotefoams may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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