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By buying an index fund, you can roughly match the market return with ease. But many of us dare to dream of bigger returns, and build a portfolio ourselves. For example, CEWE Stiftung & Co. KGaA (ETR:CWC) shareholders have seen the share price rise 12% over three years, well in excess of the market return (2.8%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 3.1%, including dividends.
So let's assess the underlying fundamentals over the last 3 years and see if they've moved in lock-step with shareholder returns.
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).
CEWE Stiftung KGaA was able to grow its EPS at 9.0% per year over three years, sending the share price higher. The average annual share price increase of 4% is actually lower than the EPS growth. So it seems investors have become more cautious about the company, over time. This cautious sentiment is reflected in its (fairly low) P/E ratio of 11.39.
The graphic below depicts how EPS has changed over time (unveil the exact values by clicking on the image).
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 CEWE Stiftung KGaA's 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 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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for CEWE Stiftung KGaA the TSR over the last 3 years was 21%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
CEWE Stiftung KGaA provided a TSR of 3.1% over the last twelve months. But that return falls short of the market. On the bright side, the longer term returns (running at about 5% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. Is CEWE Stiftung KGaA cheap compared to other companies? These 3 valuation measures might help you decide.