The simplest way to invest in stocks is to buy exchange traded funds. But you can significantly boost your returns by picking above-average stocks. For example, the Traton SE (ETR:8TRA) share price is up 11% in the last 1 year, clearly besting the market decline of around 5.5% (not including dividends). If it can keep that out-performance up over the long term, investors will do very well! The longer term returns are positive, with the share price up 9.0% in three years.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
View our latest analysis for Traton
There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
Traton was able to grow EPS by 71% in the last twelve months. It's fair to say that the share price gain of 11% did not keep pace with the EPS growth. Therefore, it seems the market isn't as excited about Traton as it was before. This could be an opportunity. This cautious sentiment is reflected in its (fairly low) P/E ratio of 7.37.
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. But while CEO remuneration is always worth checking, the really important question is whether the company can grow earnings going forward. Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here..
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Traton's TSR for the last 1 year was 18%, 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
We're pleased to report that Traton rewarded shareholders with a total shareholder return of 18% over the last year. That's including the dividend. That's better than the annualized TSR of 8% over the last three years. The improving returns to shareholders suggests the stock is becoming more popular with time. It's always interesting to track share price performance over the longer term. But to understand Traton better, we need to consider many other factors. For example, we've discovered 3 warning signs for Traton (1 makes us a bit uncomfortable!) that you should be aware of before investing here.