Fraser and Neave's (SGX:F99) earnings growth rate lags the 7.9% CAGR delivered to shareholders

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. Furthermore, you'd generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the Fraser and Neave, Limited (SGX:F99) share price is up 19% in the last five years, that's less than the market return. Zooming in, the stock is up just 4.4% in the last year.

While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.

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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.

Over half a decade, Fraser and Neave managed to grow its earnings per share at 0.6% a year. This EPS growth is slower than the share price growth of 4% 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.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

This free interactive report on Fraser and Neave's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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 Fraser and Neave the TSR over the last 5 years was 46%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Fraser and Neave provided a TSR of 8.9% over the last twelve months. But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 8% per year over five year. This suggests the company might be improving over time. It's always interesting to track share price performance over the longer term. But to understand Fraser and Neave better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Fraser and Neave .

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