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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 Vestas Wind Systems A/S (CPH:VWS) share price is up 91% in the last 5 years, clearly besting than the market return of around 33% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 36%, including dividends.
Check out our latest analysis for Vestas Wind Systems
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.
During five years of share price growth, Vestas Wind Systems achieved compound earnings per share (EPS) growth of 55% per year. The EPS growth is more impressive than the yearly share price gain of 14% over the same period. So it seems the market isn't so enthusiastic about the stock these days.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for Vestas Wind Systems the TSR over the last 5 years was 107%, 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
It's good to see that Vestas Wind Systems has rewarded shareholders with a total shareholder return of 36% in the last twelve months. That's including the dividend. That gain is better than the annual TSR over five years, which is 16%. 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. Is Vestas Wind Systems cheap compared to other companies? These 3 valuation measures might help you decide.