It might seem bad, but the worst that can happen when you buy a stock (without leverage) is that its share price goes to zero. But when you pick a company that is really flourishing, you can make more than 100%. To wit, the Coca-Cola FEMSA, S.A.B. de C.V. (NYSE:KOF) share price has flown 102% in the last three years. That sort of return is as solid as granite. It's also good to see the share price up 18% over the last quarter. But this could be related to the strong market, which is up 17% in the last three months.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
See our latest analysis for Coca-Cola FEMSA. de
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.
Coca-Cola FEMSA. de was able to grow its EPS at 33% per year over three years, sending the share price higher. The average annual share price increase of 26% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how Coca-Cola FEMSA. de has grown profits over the years, but the future is more important for shareholders. This free interactive report on Coca-Cola FEMSA. de's balance sheet strength is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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 Coca-Cola FEMSA. de the TSR over the last 3 years was 130%, 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
We're pleased to report that Coca-Cola FEMSA. de shareholders have received a total shareholder return of 24% over one year. That's including the dividend. That gain is better than the annual TSR over five years, which is 13%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before forming an opinion on Coca-Cola FEMSA. de you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.
We will like Coca-Cola FEMSA. de better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
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.