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It might be of some concern to shareholders to see the SAF-Holland SE (ETR:SFQ) share price down 15% in the last month. But in stark contrast, the returns over the last half decade have impressed. In fact, the share price is 238% higher today. So while it's never fun to see a share price fall, it's important to look at a longer time horizon. The more important question is whether the stock is too cheap or too expensive today. Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 25% decline over the last twelve months.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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, SAF-Holland achieved compound earnings per share (EPS) growth of 54% per year. This EPS growth is higher than the 28% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. The reasonably low P/E ratio of 8.51 also suggests market apprehension.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
This free interactive report on SAF-Holland's earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
What About Dividends?
It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of SAF-Holland, it has a TSR of 290% 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
While the broader market gained around 5.5% in the last year, SAF-Holland shareholders lost 21% (even including dividends). However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 31% per year over half a decade. 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. It's always interesting to track share price performance over the longer term. But to understand SAF-Holland better, we need to consider many other factors. To that end, you should be aware of the 2 warning signs we've spotted with SAF-Holland .