Yahoo Finance Zoetis' (NYSE:ZTS) investors will be pleased with their favorable 58% return over the last five years
The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the Zoetis Inc. (NYSE:ZTS) share price is up 52% in the last five years, that's less than the market return. Zooming in, the stock is up a respectable 6.0% in the last year.
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 Zoetis
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.
During five years of share price growth, Zoetis achieved compound earnings per share (EPS) growth of 13% per year. This EPS growth is higher than the 9% average annual increase in the share price. So it seems the market isn't so enthusiastic about the stock these days.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Zoetis' earnings, revenue and cash flow.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Zoetis, it has a TSR of 58% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Zoetis provided a TSR of 7.1% over the last twelve months. But that was short of the market average. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 10% over five years. It may well be that this is a business worth popping on the watching, given the continuing positive reception, over time, from the market. 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. Take risks, for example - Zoetis has 1 warning sign we think you should be aware of.
Of course Zoetis may not be the best stock to buy. So you may wish to see this free collection of growth stocks.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American 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.
