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Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. To wit, the Chocoladefabriken Lindt & Sprüngli share price has climbed 50% in five years, easily topping the market return of 13% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 4.4% in the last year, including dividends.
View our latest analysis for Chocoladefabriken Lindt & Sprüngli
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. 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.
Over half a decade, Chocoladefabriken Lindt & Sprüngli managed to grow its earnings per share at 8.6% a year. This EPS growth is remarkably close to the 8.5% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. In fact, the share price seems to largely reflect the EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
Dive deeper into Chocoladefabriken Lindt & Sprüngli's key metrics by checking this interactive graph of Chocoladefabriken Lindt & Sprüngli's earnings, revenue and cash flow.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. We note that for Chocoladefabriken Lindt & Sprüngli the TSR over the last 5 years was 58%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Chocoladefabriken Lindt & Sprüngli shareholders are up 4.4% for the year (even including dividends). Unfortunately this falls short of the market return. If we look back over five years, the returns are even better, coming in at 9.5% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. Is Chocoladefabriken Lindt & Sprüngli cheap compared to other companies? These 3 valuation measures might help you decide.