Update: E.ON (ETR:EOAN) Stock Gained 43% In The Last Three Years
One simple way to benefit from the stock market is to buy an index fund. But if you buy good businesses at attractive prices, your portfolio returns could exceed the average market return. For example, the E.ON SE (ETR:EOAN) share price is up 43% in the last three years, clearly besting the market return of around 6.2% (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 .
See our latest analysis for E.ON
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. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the three years of share price growth, E.ON actually saw its earnings per share (EPS) drop 56% per year.
So we doubt that the market is looking to EPS for its main judge of the company's value. Therefore, we think it's worth considering other metrics as well.
Interestingly, the dividend has increased over time; so that may have given the share price a boost. Sometimes yield-chasing investors will flock to a company if they think the dividend can grow over time.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
E.ON is well known by investors, and plenty of clever analysts have tried to predict the future profit levels. You can see what analysts are predicting for E.ON in this interactive graph of future profit estimates.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, E.ON's TSR for the last 3 years was 59%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
E.ON shareholders gained a total return of 12% during the year. But that was short of the market average. But at least that's still a gain! Over five years the TSR has been a reduction of 2.6% per year, over five years. So this might be a sign the business has turned its fortunes around. Importantly, we haven't analysed E.ON's dividend history. This free visual report on its dividends is a must-read if you're thinking of buying.
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 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.
