When you buy and hold a stock for the long term, you definitely want it to provide a positive return. But more than that, you probably want to see it rise more than the market average. Unfortunately for shareholders, while the Chubb Limited (NYSE:CB) share price is up 75% in the last five years, that’s less than the market return. Some buyers are laughing, though, with an increase of 24% in the last year.
So let’s assess the underlying fundamentals over the last 5 years and see if they’ve moved in lock-step with shareholder returns.
View our latest analysis for Chubb
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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.
Over half a decade, Chubb managed to grow its earnings per share at 26% a year. The EPS growth is more impressive than the yearly share price gain of 12% over the same period. So it seems the market isn’t so enthusiastic about the stock these days. This cautious sentiment is reflected in its (fairly low) P/E ratio of 11.02.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
We know that Chubb has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. Whereas the share price return 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. It’s fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Chubb, it has a TSR of 92% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
Chubb provided a TSR of 25% over the year (including dividends). That’s fairly close to the broader market return. That gain looks pretty satisfying, and it is even better than the five-year TSR of 14% per year. Even if the share price growth slows down from here, there’s a good chance that this is business worth watching in the long term. If you would like to research Chubb in more detail then you might want to take a look at whether insiders have been buying or selling shares in the company.
