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If You Had Bought Siemens (ETR:SIE) Shares Five Years Ago You'd Have Made 22%

When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, long term Siemens Aktiengesellschaft (ETR:SIE) shareholders have enjoyed a 22% share price rise over the last half decade, well in excess of the market return of around 10% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 22% , including dividends .

See our latest analysis for Siemens

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 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).

Over half a decade, Siemens managed to grow its earnings per share at 0.9% a year. This EPS growth is lower than the 4.1% average annual increase in the share price. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

XTRA:SIE Past and Future Earnings, January 23rd 2020
XTRA:SIE Past and Future Earnings, January 23rd 2020

Dive deeper into Siemens's key metrics by checking this interactive graph of Siemens's earnings, revenue and cash flow.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Siemens's TSR for the last 5 years was 40%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!

A Different Perspective

It's good to see that Siemens has rewarded shareholders with a total shareholder return of 22% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 7.0% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Siemens better, we need to consider many other factors. For example, we've discovered 1 warning sign for Siemens that you should be aware of before investing here.

If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).

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.

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