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The main point of long-term investing is to make money. Even better, you would want the stock price to rise more than the market average.but Colgate-Palmolive Company (NYSE:CL) missed the second goal, with its stock up 34% over five years, which is below the market return. But some buyers laugh that last year saw a 23% increase.
With that in mind, it’s worth checking whether a company’s underlying fundamentals are driving its long-term performance, or if there are any discrepancies.
Check out our latest analysis for Colgate-Palmolive.
In Buffett’s words, “Ships will sail around the world, but a flat-Earth society will thrive.” There will continue to be a wide discrepancy between prices and values in the marketplace. ..” One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Colgate-Palmolive achieved compound earnings per share (EPS) growth of 0.3% per year during the five-year share price period. This EPS growth is slower than the 6% annual growth in the share price over the same period. So it’s fair to think the market has a higher valuation for this business than it did five years ago. This isn’t necessarily surprising, given its track record of profit growth over the past five years.
You can see below how EPS has changed over time (unveil the exact values by clicking on the image).
We know Colgate-Palmolive has been improving its earnings lately, but will its earnings grow? Why not check this out? free A report showing analyst revenue forecasts.
What will happen to the dividend?
When looking at return on investment, it is important to consider the following differences: Total shareholder return (TSR) and stock price return. Whereas the price/earnings ratio 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 delivered by a stock. For Colgate-Palmolive, the TSR for the last 5 years is 51%. This exceeds the stock return mentioned earlier. And there’s no kudos to speculating that dividend payments are the main explanation for the divergence.
different perspective
Colgate-Palmolive offered a TSR of 26% over the last 12 months. However, its returns are below the market. The silver lining is that this return was actually better than his five-year average annual return of 9%. As the fundamentals of your business improve, so too can your profits. It’s always interesting to track stock performance over the long term. However, to understand Colgate-Palmolive better, you need to consider many other factors. For example, we identified 2 warning signs for Colgate-Palmolive What you need to know.
If you want to buy stocks with management, you might like this free List of companies. (Hint: Insiders are buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
Have feedback on this article? Curious about its content? contact Please contact us directly. Alternatively, email our 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 using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
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