Investors in Deutsche Börse (ETR:DB1) have seen decent returns of 96% over the past five years
When we invest, we're generally looking for stocks that outperform the market average. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, the Deutsche Börse AG (ETR:DB1) share price is up 76% in the last 5 years, clearly besting the market return of around 7.8% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 10.0% in the last year , 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.
Check out our latest analysis for Deutsche Börse
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 five years of share price growth, Deutsche Börse achieved compound earnings per share (EPS) growth of 14% per year. So the EPS growth rate is rather close to the annualized share price gain of 12% per year. This indicates that investor sentiment towards the company has not changed a great deal. Indeed, it would appear the share price is reacting to the EPS.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Deutsche Börse has improved its bottom line lately, but is it going to grow revenue? Check if analysts think Deutsche Börse will grow revenue in the future.
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. In the case of Deutsche Börse, it has a TSR of 96% for the last 5 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 Deutsche Börse has rewarded shareholders with a total shareholder return of 10.0% in the last twelve months. And that does include the dividend. However, that falls short of the 14% TSR per annum it has made for shareholders, each year, over five years. Potential buyers might understandably feel they've missed the opportunity, but it's always possible business is still firing on all cylinders. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For instance, we've identified 1 warning sign for Deutsche Börse that you should be aware of.
Of course Deutsche Börse 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 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.
