Davide Campari-Milano (BIT:CPR) shareholders notch a 8.3% CAGR over 5 years, yet earnings have been shrinking

Davide Campari-Milano N.V. (BIT:CPR) shareholders might be concerned after seeing the share price drop 10% in the last quarter. Looking further back, the stock has generated good profits over five years. It has returned a market beating 44% in that time.

Since the stock has added €452m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

View our latest analysis for Davide Campari-Milano

To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' 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.

Davide Campari-Milano's earnings per share are down 2.5% per year, despite strong share price performance over five years.

By glancing at these numbers, we'd posit that the decline in earnings per share is not representative of how the business has changed over the years. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.

We doubt the modest 0.6% dividend yield is attracting many buyers to the stock. On the other hand, Davide Campari-Milano's revenue is growing nicely, at a compound rate of 11% over the last five years. In that case, the company may be sacrificing current earnings per share to drive growth.

You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).

It's good to see that there was some significant insider buying in the last three months. That's a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. This free report showing analyst forecasts should help you form a view on Davide Campari-Milano

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Davide Campari-Milano, it has a TSR of 49% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!

A Different Perspective

Davide Campari-Milano shareholders gained a total return of 16% during the year. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 8% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for Davide Campari-Milano you should know about.

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 Italian 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.