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The main point of investing for the long term is to make money. Furthermore, you'd generally like to see the share price rise faster than the market. Unfortunately for shareholders, while the Koninklijke KPN N.V. (AMS:KPN) share price is up 33% in the last five years, that's less than the market return. Looking at the last year alone, the stock is up 13%.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
Check out our latest analysis for Koninklijke KPN
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. 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.
Over half a decade, Koninklijke KPN managed to grow its earnings per share at 20% a year. The EPS growth is more impressive than the yearly share price gain of 6% over the same period. So one could conclude that the broader market has become more cautious towards the stock.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that Koninklijke KPN has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). 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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Koninklijke KPN's TSR for the last 5 years was 68%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!
A Different Perspective
It's good to see that Koninklijke KPN has rewarded shareholders with a total shareholder return of 18% in the last twelve months. Of course, that includes the dividend. That's better than the annualised return of 11% over half a decade, implying that the company is doing better recently. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. It's always interesting to track share price performance over the longer term. But to understand Koninklijke KPN better, we need to consider many other factors. For example, we've discovered 2 warning signs for Koninklijke KPN that you should be aware of before investing here.