Coca-Cola Consolidated's (NASDAQ:COKE) five-year total shareholder returns outpace the underlying earnings growth
Coca-Cola Consolidated, Inc. (NASDAQ:COKE) shareholders have seen the share price descend 11% over the month. But that does not change the realty that the stock's performance has been terrific, over five years. In fact, during that period, the share price climbed 450%. Impressive! Arguably, the recent fall is to be expected after such a strong rise. The most important thing for savvy investors to consider is whether the underlying business can justify the share price gain.
Since the long term performance has been good but there's been a recent pullback of 6.7%, let's check if the fundamentals match the share price.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.
During five years of share price growth, Coca-Cola Consolidated achieved compound earnings per share (EPS) growth of 48% per year. This EPS growth is reasonably close to the 41% average annual increase in the share price. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
Dive deeper into Coca-Cola Consolidated's key metrics by checking this interactive graph of Coca-Cola Consolidated's earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of Coca-Cola Consolidated, it has a TSR of 475% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
Coca-Cola Consolidated shareholders gained a total return of 14% during the year. Unfortunately this falls short of the market return. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 42% over five years. Maybe the share price is just taking a breather while the business executes on its growth strategy. Before forming an opinion on Coca-Cola Consolidated you might want to consider these 3 valuation metrics.
Of course Coca-Cola Consolidated 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.