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secunet Security Networks Aktiengesellschaft (ETR:YSN) shareholders will doubtless be very grateful to see the share price up 41% in the last quarter. But that doesn't help the fact that the three year return is less impressive. Truth be told the share price declined 52% in three years and that return, Dear Reader, falls short of what you could have got from passive investing with an index fund.
While the stock has risen 8.6% in the past week but long term shareholders are still in the red, let's see what the fundamentals can tell us.
See our latest analysis for secunet Security Networks
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
During the three years that the share price fell, secunet Security Networks' earnings per share (EPS) dropped by 12% each year. The share price decline of 22% is actually steeper than the EPS slippage. So it's likely that the EPS decline has disappointed the market, leaving investors hesitant to buy.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
It's probably worth noting that the CEO is paid less than the median at similar sized companies. It's always worth keeping an eye on CEO pay, but a more important question is whether the company will grow earnings throughout the years. This free interactive report on secunet Security Networks' earnings, revenue and cash flow is a great place to start, if you want to investigate the stock further.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. We note that for secunet Security Networks the TSR over the last 3 years was -50%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
While the broader market gained around 20% in the last year, secunet Security Networks shareholders lost 14% (even including dividends). 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. Longer term investors wouldn't be so upset, since they would have made 0.7%, 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. Before forming an opinion on secunet Security Networks you might want to consider these 3 valuation metrics.