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Did Elmos Semiconductor's (ETR:ELG) Share Price Deserve to Gain 97%?

Simply Wall St

One simple way to benefit from the stock market is to buy an index fund. But if you pick the right individual stocks, you could make more than that. Just take a look at Elmos Semiconductor AG (ETR:ELG), which is up 97%, over three years, soundly beating the market return of 8.9% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 62% in the last year , including dividends .

View our latest analysis for Elmos Semiconductor

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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 three years of share price growth, Elmos Semiconductor achieved compound earnings per share growth of 99% per year. This EPS growth is higher than the 25% average annual increase in the share price. Therefore, it seems the market has moderated its expectations for growth, somewhat. We'd venture the lowish P/E ratio of 5.94 also reflects the negative sentiment around the stock.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

XTRA:ELG Past and Future Earnings, December 16th 2019

It is of course excellent to see how Elmos Semiconductor has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Elmos Semiconductor's financial health with this free report on its balance sheet.

What About Dividends?

As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. In the case of Elmos Semiconductor, it has a TSR of 108% for the last 3 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 Elmos Semiconductor has rewarded shareholders with a total shareholder return of 62% in the last twelve months. That's including the dividend. That's better than the annualised return of 15% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before deciding if you like the current share price, check how Elmos Semiconductor scores on these 3 valuation metrics.

Of course Elmos Semiconductor 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 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.