Brenntag (ETR:BNR) shareholders have earned a 12% CAGR over the last five years
Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. For example, long term Brenntag SE (ETR:BNR) shareholders have enjoyed a 60% share price rise over the last half decade, well in excess of the market decline of around 7.9% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 12% in the last year , including dividends .
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
Check out 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 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.
During five years of share price growth, Brenntag achieved compound earnings per share (EPS) growth of 15% per year. This EPS growth is higher than the 10% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on Brenntag's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR is a return calculation that accounts for the value of cash dividends (assuming that any dividend received was reinvested) and the calculated value of any discounted capital raisings and spin-offs. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Brenntag the TSR over the last 5 years was 80%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's nice to see that Brenntag shareholders have received a total shareholder return of 12% over the last year. And that does include the dividend. Having said that, the five-year TSR of 12% a year, is even better. 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 are like me, then you will not want to miss this free list of growing companies 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 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.
