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It hasn't been the best quarter for Nemetschek SE (ETR:NEM) shareholders, since the share price has fallen 30% in that time. But that doesn't change the fact that the returns over the last five years have been pleasing. Its return of 79% has certainly bested the market return! Unfortunately not all shareholders will have held it for the long term, so spare a thought for those caught in the 52% decline over the last twelve months.
In light of the stock dropping 8.1% 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 Nemetschek
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. 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).
During five years of share price growth, Nemetschek achieved compound earnings per share (EPS) growth of 25% per year. This EPS growth is higher than the 12% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
We know that Nemetschek has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.
What About Dividends?
When looking at investment returns, it is important to consider the difference between total shareholder return (TSR) and share price return. 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. As it happens, Nemetschek's TSR for the last 5 years was 84%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
While the broader market lost about 23% in the twelve months, Nemetschek shareholders did even worse, losing 52% (even including dividends). However, it could simply be that the share price has been impacted by broader market jitters. It might be worth keeping an eye on the fundamentals, in case there's a good opportunity. On the bright side, long term shareholders have made money, with a gain of 13% per year over half a decade. 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. Is Nemetschek cheap compared to other companies? These 3 valuation measures might help you decide.