Stock pickers are generally looking for stocks that will outperform the broader market. And while active stock picking involves risks (and requires diversification) it can also provide excess returns. For example, long term AUDI AG (ETR:NSU) shareholders have enjoyed a 32% share price rise over the last half decade, well in excess of the market return of around 5.9% (not including dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 12%, including dividends.
See our latest analysis for AUDI
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
AUDI's earnings per share are down 6.0% per year, despite strong share price performance over five years. This means it's unlikely the market is judging the company based on earnings growth. Because earnings per share don't seem to match up with the share price, we'll take a look at other metrics instead.
We are not particularly impressed by the annual compound revenue growth of 2.1% over five years. So it seems one might have to take closer look at earnings and revenue trends to see how they might influence the share price.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. Dive deeper into the earnings by checking this interactive graph of AUDI's earnings, revenue and cash flow.
What about the Total Shareholder Return (TSR)?
We've already covered AUDI's share price action, but we should also mention its 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. Its history of dividend payouts mean that AUDI's TSR of 35% over the last 5 years is better than the share price return.
A Different Perspective
We're pleased to report that AUDI shareholders have received a total shareholder return of 12% over one year. That's better than the annualised return of 6.1% over half a decade, implying that the company is doing better recently. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before forming an opinion on AUDI you might want to consider these 3 valuation metrics.