Investing in Molson Coors Beverage (NYSE:TAP) five years ago would have delivered you a 76% gain

When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. But Molson Coors Beverage Company (NYSE:TAP) has fallen short of that second goal, with a share price rise of 57% over five years, which is below the market return. Unfortunately the share price is down 13% in the last year.

With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.

Check out our latest analysis for Molson Coors Beverage

In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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.

During five years of share price growth, Molson Coors Beverage achieved compound earnings per share (EPS) growth of 38% per year. This EPS growth is higher than the 9% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days. The reasonably low P/E ratio of 10.64 also suggests market apprehension.

You can see how EPS has changed over time in the image below (click on the chart to see the exact values).

We know that Molson Coors Beverage has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for Molson Coors Beverage the TSR over the last 5 years was 76%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Investors in Molson Coors Beverage had a tough year, with a total loss of 11% (including dividends), against a market gain of about 9.7%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 12% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Molson Coors Beverage better, we need to consider many other factors. Case in point: We've spotted 1 warning sign for Molson Coors Beverage you should be aware of.

Of course Molson Coors Beverage may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

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