Unilever (LON: ULVR) compensated its shareholders with a respectable return on investment of 35%
The easiest way to invest in stocks is to buy exchange traded funds. But you can do a lot better than that by buying good quality companies at attractive prices. For example, the Unilever PLC (LON: ULVR) The stock price has risen 15% over the past five years, slightly above the market performance. Zooming in, the stock is actually down 13% last year.
See our latest review for Unilever
To paraphrase Benjamin Graham: In the short term the market is a voting machine, but in the long term it is a weighing machine. One way to look at how market sentiment has changed over time is to look at the interaction between a company’s stock price and its earnings per share (EPS).
Over the five years of stock price growth, Unilever has achieved compound earnings per share (EPS) growth of 4.3% per year. EPS growth is more impressive than the annual share price gain of 3% over the same period. So it looks like the market isn’t so keen on the stock these days.
You can see below how the EPS has evolved over time (find out the exact values by clicking on the image).
We consider it positive that insiders have made significant purchases over the past year. Even so, future profits will be much more important to whether current shareholders make money. This free Unilever’s interactive Profit, Revenue and Cash Flow report is a great place to start if you want to dig deeper into the stock.
What about dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. TSR is a yield calculation that takes into account the value of cash dividends (assuming any dividends received have been reinvested) and the calculated value of any discounted capital increase and spinoff. Arguably, the TSR gives a more complete picture of the return generated by a stock. We note that for Unilever the TSR over the past 5 years was 35%, which is better than the share price return mentioned above. And there’s no price guessing that dividend payments are a big part of the reason for the discrepancy!
A different perspective
While the broader market gained around 22% last year, Unilever shareholders lost 10% (including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the plus side, long-term shareholders made money, gaining 6% per year over half a decade. If fundamentals continue to point to sustainable long-term growth, the current sell-off could be an opportunity to consider. It is always interesting to follow the evolution of stock prices over the long term. But to understand Unilever better, there are many other factors to consider. Take risks, for example – Unilever has 2 warning signs we think you should be aware.
There are many other companies that have insiders who buy stocks. You probably do not want to miss it free list of growing companies that insiders buy.
Please note that the market returns quoted in this article reflect the market weighted average returns of stocks currently traded on UK stock exchanges.
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This Simply Wall St article is general in nature. It does not constitute a recommendation to buy or sell shares and does not take into account your goals or your financial situation. Our aim is to bring you long-term, targeted analysis based on fundamental data. Note that our analysis may not take into account the latest announcements from price sensitive companies or qualitative documents. Simply Wall St has no position in the mentioned stocks.
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