The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. To wit, the Carlo Gavazzi Holding AG (VTX:GAV) share price has flown 102% in the last three years. How nice for those who held the stock! On top of that, the share price is up 15% in about a quarter.

So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.

Check out our latest analysis for Carlo Gavazzi Holding

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

During three years of share price growth, Carlo Gavazzi Holding achieved compound earnings per share growth of 38% per year. This EPS growth is higher than the 26% average annual increase in the share price. So one could reasonably conclude that the market has cooled on the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 10.21.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

We know that Carlo Gavazzi Holding has improved its bottom line over the last three years, but what does the future have in store? If you are thinking of buying or selling Carlo Gavazzi Holding stock, you should check out this FREE detailed report on its balance sheet.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, Carlo Gavazzi Holding's TSR for the last 3 years was 120%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Carlo Gavazzi Holding has rewarded shareholders with a total shareholder return of 27% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 4% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we've discovered 2 warning signs for Carlo Gavazzi Holding (1 is concerning!) that you should be aware of before investing here.

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on Swiss exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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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