While not a mind-blowing move, it is good to see that the Fresenius SE & Co. KGaA (ETR:FRE) share price has gained 20% in the last three months. But that doesn't change the fact that the returns over the last three years have been less than pleasing. After all, the share price is down 34% in the last three years, significantly under-performing the market.
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).
During the unfortunate three years of share price decline, Fresenius SE KGaA actually saw its earnings per share (EPS) improve by 7.8% per year. This is quite a puzzle, and suggests there might be something temporarily buoying the share price. Alternatively, growth expectations may have been unreasonable in the past.
Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.
The modest 1.6% dividend yield is unlikely to be guiding the market view of the stock. Revenue is actually up 5.2% over the three years, so the share price drop doesn't seem to hinge on revenue, either. This analysis is just perfunctory, but it might be worth researching Fresenius SE KGaA more closely, as sometimes stocks fall unfairly. This could present an opportunity.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
Fresenius SE KGaA is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. Given we have quite a good number of analyst forecasts, it might be well worth checking out this free chart depicting consensus estimates.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. We note that for Fresenius SE KGaA the TSR over the last 3 years was -31%, 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
Fresenius SE KGaA provided a TSR of 14% over the last twelve months. But that was short of the market average. The silver lining is that the gain was actually better than the average annual return of 3.8% per year over five year. This could indicate that the company is winning over new investors, as it pursues its strategy. Before forming an opinion on Fresenius SE KGaA you might want to consider these 3 valuation metrics.
For those who like to find winning investments this free list of growing 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 DE exchanges.
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