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Ideally, your overall portfolio should beat the market average. But the main game is to find enough winners to more than offset the losers So we wouldn't blame long term WashTec AG (ETR:WSU) shareholders for doubting their decision to hold, with the stock down 50% over a half decade. And we doubt long term believers are the only worried holders, since the stock price has declined 36% over the last twelve months. The falls have accelerated recently, with the share price down 12% in the last three months. Of course, this share price action may well have been influenced by the 7.9% decline in the broader market, throughout the period.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for WashTec
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. 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.
Looking back five years, both WashTec's share price and EPS declined; the latter at a rate of 10% per year. Readers should note that the share price has fallen faster than the EPS, at a rate of 13% per year, over the period. This implies that the market is more cautious about the business these days.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We're pleased to report that the CEO is remunerated more modestly than most CEOs at similarly capitalized companies. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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. As it happens, WashTec's TSR for the last 5 years was -41%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!