Did You Participate In Any Of LEG Immobilien's (ETR:LEG) Respectable 77% Return?
Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. For example, the LEG Immobilien AG (ETR:LEG) share price is up 51% in the last 5 years, clearly besting the market decline of around 19% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 3.2% , including dividends .
View our latest analysis for LEG Immobilien
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 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, LEG Immobilien achieved compound earnings per share (EPS) growth of 34% per year. The EPS growth is more impressive than the yearly share price gain of 8.6% over the same period. Therefore, it seems the market has become relatively pessimistic about the company. The reasonably low P/E ratio of 8.30 also suggests market apprehension.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on LEG Immobilien's 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. 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. As it happens, LEG Immobilien's TSR for the last 5 years was 77%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's good to see that LEG Immobilien has rewarded shareholders with a total shareholder return of 3.2% in the last twelve months. That's including the dividend. Having said that, the five-year TSR of 12% 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. 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. To that end, you should learn about the 6 warning signs we've spotted with LEG Immobilien (including 2 which is are a bit unpleasant) .
Of course LEG Immobilien 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 DE exchanges.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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