The five-year decline in earnings for Crown Holdings NYSE:CCK) isn't encouraging, but shareholders are still up 25% over that period
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If you buy and hold a stock for many years, you'd hope to be making a profit. Better yet, you'd like to see the share price move up more than the market average. Unfortunately for shareholders, while the Crown Holdings, Inc. (NYSE:CCK) share price is up 20% in the last five years, that's less than the market return. Zooming in, the stock is up a respectable 8.0% in the last year.
While the stock has fallen 3.1% this week, it's worth focusing on the longer term and seeing if the stocks historical returns have been driven by the underlying fundamentals.
Check out our latest analysis for Crown Holdings
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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.
Crown Holdings' earnings per share are down 25% per year, despite strong share price performance over five years.
Since the EPS are down strongly, it seems highly unlikely market participants are looking at EPS to value the company. Given that EPS is down, but the share price is up, it seems clear the market is focussed on other aspects of the business, at the moment.
We doubt the modest 1.1% dividend yield is attracting many buyers to the stock. On the other hand, Crown Holdings' revenue is growing nicely, at a compound rate of 4.2% over the last five years. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Crown Holdings is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. You can see what analysts are predicting for Crown Holdings in this interactive graph of future profit estimates.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Crown Holdings, it has a TSR of 25% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!