Heineken's (AMS:HEIA) five-year earnings growth trails the favorable shareholder returns

The main point of investing for the long term is to make money. But more than that, you probably want to see it rise more than the market average. But Heineken N.V. (AMS:HEIA) has fallen short of that second goal, with a share price rise of 23% over five years, which is below the market return. Meanwhile, the last twelve months saw the share price rise 1.8%.

Since the stock has added €1.6b 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 Heineken

There is no denying that markets are sometimes efficient, but prices do not always reflect 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.

Over half a decade, Heineken managed to grow its earnings per share at 5.2% a year. The EPS growth is more impressive than the yearly share price gain of 4% over the same period. So one could conclude that the broader market has become more cautious towards the stock.

The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).

We know that Heineken has improved its bottom line over the last three years, but what does the future have in store? It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

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 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Heineken's TSR for the last 5 years was 32%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

Heineken shareholders are up 3.9% for the year (even including dividends). Unfortunately this falls short of the market return. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 6% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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 instance, we've identified 2 warning signs for Heineken (1 can't be ignored) that you should be aware of.

We will like Heineken better if we see some big insider buys. While we wait, check out this free list of growing companies 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 Dutch 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.