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. To wit, the CTS Eventim KGaA share price has climbed 74% in five years, easily topping the market return of 4.9% (ignoring dividends).
Although CTS Eventim KGaA has shed €226m from its market cap this week, let's take a look at its longer term fundamental trends and see if they've driven returns.
Check out our latest analysis for CTS Eventim KGaA
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 five years of share price growth, CTS Eventim KGaA moved from a loss to profitability. That would generally be considered a positive, so we'd expect the share price to be up.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how CTS Eventim KGaA has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, CTS Eventim KGaA's TSR for the last 5 years was 79%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
Investors in CTS Eventim KGaA had a tough year, with a total loss of 2.0% (including dividends), against a market gain of about 6.2%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 12% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand CTS Eventim KGaA better, we need to consider many other factors. To that end, you should learn about the 2 warning signs we've spotted with CTS Eventim KGaA (including 1 which is potentially serious) .