Coca-Cola Consolidated's (NASDAQ:COKE) five-year earnings growth trails the splendid shareholder returns

July 03, 2022
  •  Updated
October 07, 2022
NasdaqGS:COKE
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The most you can lose on any stock (assuming you don't use leverage) is 100% of your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. Long term Coca-Cola Consolidated, Inc. (NASDAQ:COKE) shareholders would be well aware of this, since the stock is up 153% in five years. Also pleasing for shareholders was the 12% gain in the last three months.

Since the stock has added US$218m to its market cap in the past week alone, let's see if underlying performance has been driving long-term returns.

See our latest analysis for Coca-Cola Consolidated

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During the last half decade, Coca-Cola Consolidated became profitable. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here.

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

earnings-per-share-growth
NasdaqGS:COKE Earnings Per Share Growth July 3rd 2022

It is of course excellent to see how Coca-Cola Consolidated has grown profits over the years, but the future is more important for shareholders. It might be well worthwhile taking a look at our free report on how its financial position has changed over time.

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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Coca-Cola Consolidated the TSR over the last 5 years was 158%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Coca-Cola Consolidated has rewarded shareholders with a total shareholder return of 47% in the last twelve months. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 21%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. To that end, you should be aware of the 2 warning signs we've spotted with Coca-Cola Consolidated .

If you are like me, then you will not want to miss this free list of growing companies that insiders are buying.

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

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