Brenntag (ETR:BNR) shareholders have earned a 17% CAGR over the last three years
By buying an index fund, investors can approximate the average market return. But if you choose individual stocks with prowess, you can make superior returns. For example, the Brenntag SE (ETR:BNR) share price is up 51% in the last three years, clearly besting the market decline of around 3.7% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 4.3% , including dividends .
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
See our latest analysis for Brenntag
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).
During three years of share price growth, Brenntag achieved compound earnings per share growth of 22% per year. The average annual share price increase of 15% is actually lower than the EPS growth. So one could reasonably conclude that the market has cooled on the stock.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Brenntag has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Brenntag, it has a TSR of 61% for the last 3 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that Brenntag has rewarded shareholders with a total shareholder return of 4.3% in the last twelve months. Of course, that includes the dividend. Having said that, the five-year TSR of 10% a year, is even better. The pessimistic view would be that be that the stock has its best days behind it, but on the other hand the price might simply be moderating while the business itself continues to execute. It's always interesting to track share price performance over the longer term. But to understand Brenntag better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with Brenntag .
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on German 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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