VZ Holding's (VTX:VZN) three-year earnings growth trails the strong shareholder returns

The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But in contrast you can make much more than 100% if the company does well. For instance the VZ Holding AG (VTX:VZN) share price is 112% higher than it was three years ago. That sort of return is as solid as granite. We note the stock price is up 3.2% in the last seven days.

The past week has proven to be lucrative for VZ Holding investors, so let's see if fundamentals drove the company's three-year performance.

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To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

VZ Holding was able to grow its EPS at 15% per year over three years, sending the share price higher. This EPS growth is lower than the 29% average annual increase in the share price. This suggests that, as the business progressed over the last few years, it gained the confidence of market participants. It is quite common to see investors become enamoured with a business, after a few years of solid progress.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that VZ Holding has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.

What About Dividends?

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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for VZ Holding the TSR over the last 3 years was 126%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!

A Different Perspective

VZ Holding shareholders gained a total return of 5.2% during the year. But that was short of the market average. If we look back over five years, the returns are even better, coming in at 16% per year for five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. Before deciding if you like the current share price, check how VZ Holding scores on these 3 valuation metrics.

If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.

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

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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.