Yahoo Finance Did You Miss EssilorLuxottica Société anonyme's (EPA:EL) 40% Share Price Gain?
These days it's easy to simply buy an index fund, and your returns should (roughly) match the market. But the truth is, you can make significant gains if you buy good quality businesses at the right price. For example, the EssilorLuxottica Société anonyme (EPA:EL) share price is 40% higher than it was five years ago, which is more than the market average. We're also happy to report the stock is up a healthy 32% in the last year.
Check out our latest analysis for EssilorLuxottica Société anonyme
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During five years of share price growth, EssilorLuxottica Société anonyme actually saw its EPS drop 6.4% per year.
This means it's unlikely the market is judging the company based on earnings growth. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.
The modest 1.5% dividend yield is unlikely to be propping up the share price. In contrast revenue growth of 19% per year is probably viewed as evidence that EssilorLuxottica Société anonyme is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
EssilorLuxottica Société anonyme is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for EssilorLuxottica Société anonyme in this interactive graph of future profit estimates.
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 EssilorLuxottica Société anonyme the TSR over the last 5 years was 50%, 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 EssilorLuxottica Société anonyme has rewarded shareholders with a total shareholder return of 34% in the last twelve months. And that does include the dividend. That's better than the annualised return of 8.4% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. 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. For instance, we've identified 2 warning signs for EssilorLuxottica Société anonyme (1 is significant) that you should be aware of.
For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on FR exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. 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. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
