The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market Unfortunately for shareholders, while the Heineken N.V. (AMS:HEIA) share price is up 11% in the last five years, that's less than the market return. The last year has been disappointing, with the stock price down 5.1% in that time.
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).
During five years of share price growth, Heineken actually saw its EPS drop 14% per year.
Since the EPS are down strongly, it seems highly unlikely market participants are looking at EPS to value the company. The falling EPS doesn't correlate with the climbing share price, so it's worth taking a look at other metrics.
On the other hand, Heineken's revenue is growing nicely, at a compound rate of 3.1% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Heineken is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. So we recommend checking out this free report showing consensus forecasts
What about the Total Shareholder Return (TSR)?
Investors should note that there's a difference between Heineken's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Dividends have been really beneficial for Heineken shareholders, and that cash payout contributed to why its TSR of 21%, over the last 5 years, is better than the share price return.
A Different Perspective
Heineken shareholders are down 3.8% for the year, but the market itself is up 2.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. To that end, you should learn about the 3 warning signs we've spotted with Heineken (including 1 which is shouldn't be ignored) .
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 NL 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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