1&1 (ETR:1U1) shareholders have endured a 59% loss from investing in the stock five years ago
1&1 AG (ETR:1U1) shareholders will doubtless be very grateful to see the share price up 35% in the last quarter. But that can't change the reality that over the longer term (five years), the returns have been really quite dismal. In fact, the share price has declined rather badly, down some 59% in that time. So is the recent increase sufficient to restore confidence in the stock? Not yet. Of course, this could be the start of a turnaround.
So let's have a look and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for 1&1
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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
While the share price declined over five years, 1&1 actually managed to increase EPS by an average of 0.8% per year. Given the share price reaction, one might suspect that EPS is not a good guide to the business performance during the period (perhaps due to a one-off loss or gain). Alternatively, growth expectations may have been unreasonable in the past.
Based on these numbers, we'd venture that the market may have been over-optimistic about forecast growth, half a decade ago. Having said that, we might get a better idea of what's going on with the stock by looking at other metrics.
We don't think that the 0.3% is big factor in the share price, since it's quite small, as dividends go. Revenue is actually up 2.8% over the time period. A more detailed examination of the revenue and earnings may or may not explain why the share price languishes; there could be an opportunity.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
1&1 is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling 1&1 stock, you should check out this free report showing analyst consensus estimates for future profits.
A Different Perspective
It's nice to see that 1&1 shareholders have received a total shareholder return of 18% over the last year. That's including the dividend. Notably the five-year annualised TSR loss of 10% per year compares very unfavourably with the recent share price performance. The long term loss makes us cautious, but the short term TSR gain certainly hints at a brighter future. It's always interesting to track share price performance over the longer term. But to understand 1&1 better, we need to consider many other factors. Consider for instance, the ever-present spectre of investment risk. We've identified 3 warning signs with 1&1 (at least 1 which shouldn't be ignored) , and understanding them should be part of your investment process.
We will like 1&1 better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on German 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.
