In This Article:
Frequentis AG (ETR:FQT) shareholders might be concerned after seeing the share price drop 16% in the last quarter. Looking further back, the stock has generated good profits over five years. After all, the share price is up a market-beating 29% in that time.
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.
Check out our latest analysis for Frequentis
While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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).
During five years of share price growth, Frequentis achieved compound earnings per share (EPS) growth of 4.5% per year. So the EPS growth rate is rather close to the annualized share price gain of 5% per year. This indicates that investor sentiment towards the company has not changed a great deal. Rather, the share price has approximately tracked EPS growth.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It might be well worthwhile taking a look at our free report on Frequentis' earnings, revenue and cash flow.
What About Dividends?
As well as measuring the share price return, investors should also consider the 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for Frequentis the TSR over the last 5 years was 34%, 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
Investors in Frequentis had a tough year, with a total loss of 8.9% (including dividends), against a market gain of about 22%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 6%, each year, over five years. It could be that the recent sell-off is an opportunity, so it may be worth checking the fundamental data for signs of a long term growth trend. Is Frequentis cheap compared to other companies? These 3 valuation measures might help you decide.