In This Article:
If you want to compound wealth in the stock market, you can do so by buying an index fund. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the DEFAMA Deutsche Fachmarkt AG (ETR:DEF) share price is up 23% in the last year, clearly besting than the market return of around -3.5% (not including dividends). That's a solid performance by our standards! We'll need to follow DEFAMA Deutsche Fachmarkt for a while to get a better sense of its share price trend, since it hasn't been listed for particularly long.
Check out our latest analysis for DEFAMA Deutsche Fachmarkt
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
DEFAMA Deutsche Fachmarkt was able to grow EPS by 7.2% in the last twelve months. This EPS growth is significantly lower than the 23% increase in the share price. So it's fair to assume the market has a higher opinion of the business than it a year ago.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It is of course excellent to see how DEFAMA Deutsche Fachmarkt has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at DEFAMA Deutsche Fachmarkt'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 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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of DEFAMA Deutsche Fachmarkt, it has a TSR of 26% for the last year. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
It's nice to see that DEFAMA Deutsche Fachmarkt shareholders have gained 26% over the last year, including dividends. Unfortunately the share price is down 7.3% over the last quarter. It may simply be that the share price got ahead of itself, although there may have been fundamental developments that are weighing on it. Is DEFAMA Deutsche Fachmarkt cheap compared to other companies? These 3 valuation measures might help you decide.