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Is Kering's (EPA:KER) Share Price Gain Of 174% Well Earned?

Simply Wall St

It might be of some concern to shareholders to see the Kering SA (EPA:KER) share price down 17% in the last month. But that doesn't change the fact that shareholders have received really good returns over the last five years. Indeed, the share price is up an impressive 174% in that time. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. Only time will tell if there is still too much optimism currently reflected in the share price.

View our latest analysis for Kering

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

Over half a decade, Kering managed to grow its earnings per share at 19% a year. So the EPS growth rate is rather close to the annualized share price gain of 22% per year. 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.

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

ENXTPA:KER Past and Future Earnings, August 22nd 2019

It is of course excellent to see how Kering has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Kering stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Kering the TSR over the last 5 years was 228%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

Kering shareholders are down 2.1% for the year (even including dividends), but the market itself is up 3.1%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 27% 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. Before deciding if you like the current share price, check how Kering scores on these 3 valuation metrics.

But note: Kering may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

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.

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. Thank you for reading.