Advertisement
UK Markets open in 7 hrs 35 mins
  • NIKKEI 225

    38,633.02
    +62.26 (+0.16%)
     
  • HANG SENG

    18,335.32
    -95.07 (-0.52%)
     
  • CRUDE OIL

    82.34
    +0.17 (+0.21%)
     
  • GOLD FUTURES

    2,373.40
    +4.40 (+0.19%)
     
  • DOW

    39,134.76
    +299.90 (+0.77%)
     
  • BTC-GBP

    51,296.17
    +73.87 (+0.14%)
     
  • CMC Crypto 200

    1,360.33
    -22.34 (-1.62%)
     
  • Nasdaq

    17,721.59
    -140.64 (-0.79%)
     
  • ^FTAS

    4,508.44
    +35.07 (+0.78%)
     

The total return for secunet Security Networks (ETR:YSN) investors has risen faster than earnings growth over the last five years

Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. For example, the secunet Security Networks Aktiengesellschaft (ETR:YSN) share price is up 60% in the last 5 years, clearly besting the market return of around 4.6% (ignoring dividends).

Although secunet Security Networks has shed €58m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.

See our latest analysis for secunet Security Networks

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just 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.

ADVERTISEMENT

Over half a decade, secunet Security Networks managed to grow its earnings per share at 6.0% a year. This EPS growth is slower than the share price growth of 10% per year, over the same period. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

earnings-per-share-growth
XTRA:YSN Earnings Per Share Growth March 16th 2024

We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. It might be well worthwhile taking a look at our free report on secunet Security Networks' earnings, revenue and cash flow.

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 secunet Security Networks the TSR over the last 5 years was 70%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

While the broader market gained around 11% in the last year, secunet Security Networks shareholders lost 26% (even including dividends). Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. Longer term investors wouldn't be so upset, since they would have made 11%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. 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. Case in point: We've spotted 3 warning signs for secunet Security Networks you should be aware of.

We will like secunet Security Networks better if we see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on German exchanges.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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.