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Infineon Technologies AG (ETR:IFX) shareholders might be concerned after seeing the share price drop 14% in the last quarter. On the bright side the returns have been quite good over the last half decade. Its return of 77% has certainly bested the market return!
After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.
See our latest analysis for Infineon Technologies
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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).
Over half a decade, Infineon Technologies managed to grow its earnings per share at 13% a year. That makes the EPS growth particularly close to the yearly share price growth of 12%. That suggests that the market sentiment around the company hasn't changed much over that time. Indeed, it would appear the share price is reacting to the EPS.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how Infineon Technologies has grown profits over the years, but the future is more important for shareholders. This free interactive report on Infineon Technologies' balance sheet strength is a great place to start, if you want to investigate the stock further.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. In the case of Infineon Technologies, it has a TSR of 85% for the last 5 years. That exceeds its share price return that we previously mentioned. This is largely a result of its dividend payments!
A Different Perspective
Infineon Technologies shareholders are down 2.4% for the year (even including dividends), but the market itself is up 10.0%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 13% 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. Before forming an opinion on Infineon Technologies you might want to consider these 3 valuation metrics.