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, long term Siemens Aktiengesellschaft (ETR:SIE) shareholders have enjoyed a 65% share price rise over the last half decade, well in excess of the market return of around 4.8% (not including dividends). On the other hand, the more recent gains haven’t been so impressive, with shareholders gaining just 13%, including dividends.
Now it’s worth having a look at the company’s fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
View our latest analysis for Siemens
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, Siemens achieved compound earnings per share (EPS) growth of 13% per year. This EPS growth is higher than the 11% average annual increase in the share price. So it seems the market isn’t so enthusiastic about the stock these days.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Siemens has improved its bottom line lately, but is it going to grow revenue? If you’re interested, you could check this free report showing consensus revenue forecasts.
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. We note that for Siemens the TSR over the last 5 years was 112%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
We’re pleased to report that Siemens shareholders have received a total shareholder return of 13% over one year. That’s including the dividend. Having said that, the five-year TSR of 16% a year, is even better. 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. Consider for instance, the ever-present spectre of investment risk. We’ve identified 1 warning sign with Siemens , and understanding them should be part of your investment process.
For those who like to find winning investments this free list of undervalued companies with recent insider purchasing, could be just the ticket.
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.
