Yahoo Finance Those who invested in HMS Bergbau (ETR:HMU) five years ago are up 41%
Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. For example, the HMS Bergbau AG (ETR:HMU) share price is up 36% in the last 5 years, clearly besting the market return of around 6.0% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 22%, including dividends.
So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.
View our latest analysis for HMS Bergbau
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 flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
Over half a decade, HMS Bergbau managed to grow its earnings per share at 51% a year. This EPS growth is higher than the 6% average annual increase in the share price. Therefore, it seems the market has become relatively pessimistic about the company. This cautious sentiment is reflected in its (fairly low) P/E ratio of 9.14.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.
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. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. As it happens, HMS Bergbau's TSR for the last 5 years was 41%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
We're pleased to report that HMS Bergbau shareholders have received a total shareholder return of 22% over one year. Of course, that includes the dividend. That gain is better than the annual TSR over five years, which is 7%. Therefore it seems like sentiment around the company has been positive lately. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Consider risks, for instance. Every company has them, and we've spotted 1 warning sign for HMS Bergbau you should know about.
If you are like me, then you will not want to miss this free list of undervalued small caps that insiders are buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on German exchanges.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
