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When we invest, we're generally looking for stocks that outperform the market average. And in our experience, buying the right stocks can give your wealth a significant boost. For example, the Aumann AG (ETR:AAG) share price is up 46% in the last 5 years, clearly besting the market return of around 33% (ignoring 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.
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.
During the last half decade, Aumann became profitable. That's generally thought to be a genuine positive, so investors may expect to see an increasing share price.
You can see below how EPS has changed over time (discover the exact values by clicking on the image).
It is of course excellent to see how Aumann has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at Aumann's financial health with this free report on its balance sheet.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. As it happens, Aumann's TSR for the last 5 years was 50%, 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
Aumann shareholders are down 21% for the year (even including dividends), but the market itself is up 14%. Even the share prices of good stocks drop sometimes, but we want to see improvements in the fundamental metrics of a business, before getting too interested. On the bright side, long term shareholders have made money, with a gain of 8% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. It's always interesting to track share price performance over the longer term. But to understand Aumann better, we need to consider many other factors. For instance, we've identified 2 warning signs for Aumann (1 shouldn't be ignored) that you should be aware of.