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When you buy shares in a company, it's worth keeping in mind the possibility that it could fail, and you could lose your money. But on the bright side, you can make far more than 100% on a really good stock. Long term Sixt SE (ETR:SIX2) shareholders would be well aware of this, since the stock is up 138% in five years. On top of that, the share price is up 11% in about a quarter. But this could be related to the strong market, which is up 8.5% in the last three months.
In light of the stock dropping 4.9% in the past week, we want to investigate the longer term story, and see if fundamentals have been the driver of the company's positive five-year return.
Check out our latest analysis for Sixt
While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During five years of share price growth, Sixt achieved compound earnings per share (EPS) growth of 2.8% per year. This EPS growth is lower than the 19% average annual increase in the share price. This suggests that market participants hold the company in higher regard, these days. That's not necessarily surprising considering the five-year track record of earnings growth.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Dive deeper into Sixt's key metrics by checking this interactive graph of Sixt's earnings, revenue and cash flow.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Sixt's TSR for the last 5 years was 173%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
Investors in Sixt had a tough year, with a total loss of 1.6% (including dividends), against a market gain of about 17%. 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 22%, 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. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. Like risks, for instance. Every company has them, and we've spotted 3 warning signs for Sixt (of which 1 is a bit unpleasant!) you should know about.