Shareholders Of Croda International (LON:CRDA) Must Be Happy With Their 111% Total Return

When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, the Croda International Plc (LON:CRDA) share price is up 81% in the last 5 years, clearly besting the market decline of around 11% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 13% , including dividends .

See our latest analysis for Croda International

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.

During five years of share price growth, Croda International achieved compound earnings per share (EPS) growth of 6.0% per year. This EPS growth is slower than the share price growth of 13% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. That's not necessarily surprising considering the five-year track record of earnings growth.

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

LSE:CRDA Earnings Per Share Growth July 8th 2020
LSE:CRDA Earnings Per Share Growth July 8th 2020

This free interactive report on Croda International's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.

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 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. As it happens, Croda International's TSR for the last 5 years was 111%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.

A Different Perspective

It's good to see that Croda International has rewarded shareholders with a total shareholder return of 13% in the last twelve months. And that does include the dividend. However, that falls short of the 16% TSR per annum it has made for shareholders, each year, over five years. It's always interesting to track share price performance over the longer term. But to understand Croda International better, we need to consider many other factors. For example, we've discovered 2 warning signs for Croda International that you should be aware of before investing here.

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.

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. 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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