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Passive investing in index funds can generate returns that roughly match the overall market. But you can do a lot better than that by buying good quality businesses for attractive prices. For example, the Hamburger Hafen und Logistik Aktiengesellschaft (ETR:HHFA) share price is up 26% in the last five years, slightly above the market return. It's also good to see that the stock is up 11% in a year.
So let's investigate and see if the longer term performance of the company has been in line with the underlying business' progress.
Our free stock report includes 2 warning signs investors should be aware of before investing in Hamburger Hafen und Logistik. Read for free now.
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 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 five years of share price growth, Hamburger Hafen und Logistik actually saw its EPS drop 21% per year.
Since the EPS are down strongly, it seems highly unlikely market participants are looking at EPS to value the company. The falling EPS doesn't correlate with the climbing share price, so it's worth taking a look at other metrics.
The modest 0.9% dividend yield is unlikely to be propping up the share price. In contrast revenue growth of 3.4% per year is probably viewed as evidence that Hamburger Hafen und Logistik is growing, a real positive. In that case, the company may be sacrificing current earnings per share to drive growth.
You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).
This free interactive report on Hamburger Hafen und Logistik's balance sheet strength is a great place to start, if you want to investigate the stock further.
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 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, Hamburger Hafen und Logistik's TSR for the last 5 years was 51%, which exceeds the share price return mentioned earlier. The dividends paid by the company have thusly boosted the total shareholder return.