Yahoo Finance Deutsche Börse's (ETR:DB1) 10% CAGR outpaced the company's earnings growth over the same five-year period
When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. To wit, the Deutsche Börse share price has climbed 48% in five years, easily topping the market return of 6.0% (ignoring dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 18% in the last year, including dividends.
Since it's been a strong week for Deutsche Börse shareholders, let's have a look at trend of the longer term fundamentals.
View our latest analysis for Deutsche Börse
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Deutsche Börse managed to grow its earnings per share at 15% a year. The EPS growth is more impressive than the yearly share price gain of 8% over the same period. So one could conclude that the broader market has become more cautious towards the stock.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Deutsche Börse, it has a TSR of 65% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that Deutsche Börse shareholders have received a total shareholder return of 18% over one year. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 10% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. Is Deutsche Börse cheap compared to other companies? These 3 valuation measures might help you decide.
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 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.
