Generally, the goal of active stock selection is to find companies that provide returns above the market average. Acquiring undervalued companies is one path to excess profits. for example, Siemens Healthneers AG (ETR:SHL)'s share price is up 46% over the past five years, clearly outperforming the market return of around 0.9% (ignoring dividends). However, recent returns haven't been as impressive, with the stock returning just 0.7% over the last year.
So let's do some research and see if the company's long-term performance is in line with the progress of its underlying business.
Check out our latest analysis for Siemens Healthineers.
Markets are powerful pricing mechanisms, but stock prices reflect not only underlying business performance but also investor sentiment. By comparing earnings per share (EPS) and share price changes over time, we can learn how investor attitudes to a company have changed over time.
Over five years, Siemens Healthineers managed to grow its earnings per share at 1.0% per year. This growth in his EPS is slower than the 8% annual growth in the stock price over the same period. This suggests that market participants have been valuing the company highly recently. And this is not surprising given its track record of growth.
The image below shows how EPS has changed over time (unveil the exact values by clicking on the image).
Before buying or selling a stock, we always recommend taking a closer look at its historical growth trends, available here.
What will happen to the dividend?
As well as measuring share price return, investors should also consider 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 increases and spin-offs. So for companies that pay a generous dividend, the TSR is often much higher than the share price return. For Siemens Healthineers, the TSR for the last 5 years is 57%. This exceeds the stock return mentioned earlier. And there's no kudos to speculating that dividend payments are the main explanation for the divergence.
different perspective
Siemens Healthineers shareholders received a total return of 0.7% for the year. However, its returns are below the market. On the bright side, long-term returns (which have hovered around 9% per annum over five years) look better. This could be a business worth watching, given that it continues to be well received by the market over time. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. For example, we discovered that 2 warning signs for Siemens Healthineers (1 can't be ignored!) Here's what you need to know before investing.
of course Siemens Healthineers may not be the best stock to buy.So you might want to see this free A collection of growth stocks.
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 using only unbiased methodologies, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.
