By buying an index fund, you can roughly match the market return with ease. But if you pick the right individual stocks, you could make more than that. Just take a look at Molson Coors Beverage Company (NYSE:TAP), which is up 23%, over three years, soundly beating the market return of 12% (not including dividends).
So let’s assess the underlying fundamentals over the last 3 years and see if they’ve moved in lock-step with shareholder returns.
Check out our latest analysis for Molson Coors Beverage
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During three years of share price growth, Molson Coors Beverage moved from a loss to profitability. That would generally be considered a positive, so we’d expect the share price to be up.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how Molson Coors Beverage has grown profits over the years, but the future is more important for shareholders. This free interactive report on Molson Coors Beverage’s balance sheet strength is a great place to start, if you want to investigate the stock further.
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. We note that for Molson Coors Beverage the TSR over the last 3 years was 34%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
While the broader market gained around 34% in the last year, Molson Coors Beverage shareholders lost 2.4% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn’t be so upset, since they would have made 4%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For example, we’ve discovered 3 warning signs for Molson Coors Beverage (1 makes us a bit uncomfortable!) that you should be aware of before investing here.
