These days it’s easy to simply buy an index fund, and your returns should (roughly) match the market. But you can do a lot better than that by buying good quality businesses for attractive prices. For example, the United Breweries Limited (NSE:UBL) share price is up 86% in the last five years, slightly above the market return. We’re also happy to report the stock is up a healthy 72% in the last year.
Now it’s worth having a look at the company’s fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it’s a weighing machine. 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.
United Breweries’ earnings per share are down 2.8% per year, despite strong share price performance over five years.
By glancing at these numbers, we’d posit that the decline in earnings per share is not representative of how the business has changed over the years. Since the change in EPS doesn’t seem to correlate with the change in share price, it’s worth taking a look at other metrics.
We doubt the modest 0.03% dividend yield is attracting many buyers to the stock. It is not great to see that revenue has dropped by per year over five years. It certainly surprises us that the share price is up, but perhaps a closer examination of the data will yield answers.
The company’s revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
We know that United Breweries has improved its bottom line lately, but what does the future have in store? So it makes a lot of sense to check out what analysts think United Breweries will earn in the future (free profit forecasts).
A Different Perspective
It’s nice to see that United Breweries shareholders have received a total shareholder return of 73% over the last year. Of course, that includes 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. You might want to assess this data-rich visualization of its earnings, revenue and cash flow.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on IN exchanges.
Courtesy: Simply Wall St
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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