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When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. One great example is First Sensor AG (ETR:SIS) which saw its share price drive 114% higher over five years.
With that in mind, it's worth seeing if the company's underlying fundamentals have been the driver of long term performance, or if there are some discrepancies.
View our latest analysis for First Sensor
Given that First Sensor only made minimal earnings in the last twelve months, we'll focus on revenue to gauge its business development. Generally speaking, we'd consider a stock like this alongside loss-making companies, simply because the quantum of the profit is so low. For shareholders to have confidence a company will grow profits significantly, it must grow revenue.
In the last 5 years First Sensor saw its revenue shrink by 6.4% per year. On the other hand, the share price done the opposite, gaining 16%, compound, each year. It just goes to show tht the market is forward looking, and it's not always easy to predict the future based on past trends. Still, this situation makes us a little wary of the stock.
The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image).
If you are thinking of buying or selling First Sensor stock, you should check out this FREE detailed report on its balance sheet.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. We note that for First Sensor the TSR over the last 5 years was 123%, 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
First Sensor provided a TSR of 4.6% over the last twelve months. But that was short of the market average. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 17% over five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. 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. For instance, we've identified 1 warning sign for First Sensor that you should be aware of.