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 Coles Group Limited (ASX:COL) share price is up 31% in the last five years, that's less than the market return. Some buyers are laughing, though, with an increase of 30% 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.

We've discovered 2 warning signs about Coles Group. View them for free.

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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 five years of share price growth, Coles Group actually saw its EPS drop 1.4% per year.

By glancing at these numbers, we'd posit that the decline in earnings per share is not representative of how the business has changed over the years. Therefore, it's worth taking a look at other metrics to try to understand the share price movements.

In contrast revenue growth of 3.2% per year is probably viewed as evidence that Coles Group is growing, a real positive. It's quite possible that management are prioritizing revenue growth over EPS growth at the moment.

The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).ASX:COL Earnings and Revenue Growth April 22nd 2025

Coles Group is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. So it makes a lot of sense to check out what analysts think Coles Group will earn in the future (free analyst consensus estimates)

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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 Coles Group, 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

We're pleased to report that Coles Group shareholders have received a total shareholder return of 35% over one year. And that does include the dividend. That gain is better than the annual TSR over five years, which is 10%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Case in point: We've spotted  2 warning signs for Coles Group you should be aware of.

Story Continues

But note: Coles Group may not be the best stock to buy. So take a peek at this freelist of interesting companies with past earnings growth (and further growth forecast).

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

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