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When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. One great example is Edel SE & Co. KGaA (ETR:EDL) which saw its share price drive 142% higher over five years.
Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.
Check out our latest analysis for Edel SE KGaA
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. 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, Edel SE KGaA achieved compound earnings per share (EPS) growth of 33% per year. The EPS growth is more impressive than the yearly share price gain of 19% over the same period. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 7.71.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
It is of course excellent to see how Edel SE KGaA has grown profits over the years, but the future is more important for shareholders. If you are thinking of buying or selling Edel SE KGaA stock, you should check out this FREE detailed 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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Edel SE KGaA, it has a TSR of 213% 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
Edel SE KGaA's TSR for the year was broadly in line with the market average, at 14%. It has to be noted that the recent return falls short of the 26% shareholders have gained each year, over half a decade. Although the share price growth has slowed, the longer term story points to a business well worth watching. 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 example, we've discovered 1 warning sign for Edel SE KGaA that you should be aware of before investing here.