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For many, the main point of investing in the stock market is to achieve spectacular returns. And we've seen some truly amazing gains over the years. To wit, the PNE AG (ETR:PNE3) share price has soared 502% over five years. And this is just one example of the epic gains achieved by some long term investors. In the last week shares have slid back 1.4%. It really delights us to see such great share price performance for investors.
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.
See our latest analysis for PNE
PNE isn't currently profitable, so most analysts would look to revenue growth to get an idea of how fast the underlying business is growing. Shareholders of unprofitable companies usually expect strong revenue growth. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
In the last 5 years PNE saw its revenue grow at 4.4% per year. Put simply, that growth rate fails to impress. Therefore, we're a little surprised to see the share price gain has been so strong, at 43% per year, compound, over the period. We don't think the growth over the period is that great, but it could be that faster growth appears to some to be on the horizon. Having said that, a closer look at the numbers might surface good reasons to believe that profits will gush in the future.
The image below shows how earnings and revenue have tracked over time (if you click on the image you can see greater detail).
Take a more thorough look at PNE's financial health with this free 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 PNE the TSR over the last 5 years was 528%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
Investors in PNE had a tough year, with a total loss of 9.7% (including dividends), against a market gain of about 9.0%. 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 44% 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. It's always interesting to track share price performance over the longer term. But to understand PNE better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with PNE .