Yahoo Finance Westag's (FRA:WUG) investors will be pleased with their 28% return over the last five years
Generally speaking the aim of active stock picking is to find companies that provide returns that are superior to the market average. Buying under-rated businesses is one path to excess returns. For example, long term Westag AG (FRA:WUG) shareholders have enjoyed a 20% share price rise over the last half decade, well in excess of the market return of around 7.3% (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.
Check out our latest analysis for Westag
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the five years of share price growth, Westag moved from a loss to profitability. That would generally be considered a positive, so we'd hope to see the share price to rise.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
This free interactive report on Westag's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Westag the TSR over the last 5 years was 28%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that Westag shareholders have received a total shareholder return of 13% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 5%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Westag better, we need to consider many other factors. Take risks, for example - Westag has 3 warning signs (and 1 which is potentially serious) we think you should know about.
But note: Westag may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).
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.