Yahoo Finance The past year for Coca-Cola HBC (LON:CCH) investors has not been profitable
Investors can approximate the average market return by buying an index fund. But if you buy individual stocks, you can do both better or worse than that. For example, the Coca-Cola HBC AG (LON:CCH) share price is down 20% in the last year. That's disappointing when you consider the market declined 7.0%. However, the longer term returns haven't been so bad, with the stock down 16% in the last three years.
It's worthwhile assessing if the company's economics have been moving in lockstep with these underwhelming shareholder returns, or if there is some disparity between the two. So let's do just that.
See our latest analysis for Coca-Cola HBC
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 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).
Unhappily, Coca-Cola HBC had to report a 11% decline in EPS over the last year. This reduction in EPS is not as bad as the 20% share price fall. Unsurprisingly, given the lack of EPS growth, the market seems to be more cautious about the stock.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Dive deeper into Coca-Cola HBC's key metrics by checking this interactive graph of Coca-Cola HBC'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 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 Coca-Cola HBC the TSR over the last 1 year was -18%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We regret to report that Coca-Cola HBC shareholders are down 18% for the year (even including dividends). Unfortunately, that's worse than the broader market decline of 7.0%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Unfortunately, last year's performance may indicate unresolved challenges, given that it was worse than the annualised loss of 0.1% over the last half decade. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. It's always interesting to track share price performance over the longer term. But to understand Coca-Cola HBC better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Coca-Cola HBC , and understanding them should be part of your investment process.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on GB exchanges.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
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