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The simplest way to invest in stocks is to buy exchange traded funds. But one can do better than that by picking better than average stocks (as part of a diversified portfolio). For example, the KWS SAAT SE & Co. KGaA (ETR:KWS) share price is up 23% in the last 1 year, clearly besting the market return of around 17% (not including dividends). That's a solid performance by our standards! In contrast, the longer term returns are negative, since the share price is 12% lower than it was three years ago.
Now it's worth having a look at the company's fundamentals too, because that will help us determine if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for KWS SAAT SE KGaA
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 the last year KWS SAAT SE KGaA grew its earnings per share (EPS) by 46%. This EPS growth is significantly higher than the 23% increase in the share price. Therefore, it seems the market isn't as excited about KWS SAAT SE KGaA as it was before. This could be an opportunity. The caution is also evident in the lowish P/E ratio of 11.56.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that KWS SAAT SE KGaA has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, KWS SAAT SE KGaA's TSR for the last 1 year was 25%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
We're pleased to report that KWS SAAT SE KGaA shareholders have received a total shareholder return of 25% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 3%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. Before deciding if you like the current share price, check how KWS SAAT SE KGaA scores on these 3 valuation metrics.