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Telefónica Deutschland Holding AG (ETR:O2D) shareholders should be happy to see the share price up 13% in the last quarter. But if you look at the last five years the returns have not been good. In fact, the share price is down 26%, which falls well short of the return you could get by buying an index fund.
Now let's have a look at the company's fundamentals, and see if the long term shareholder return has matched the performance of the underlying business.
Check out our latest analysis for Telefónica Deutschland Holding
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).
During five years of share price growth, Telefónica Deutschland Holding moved from a loss to profitability. That would generally be considered a positive, so we are surprised to see the share price is down. Other metrics may better explain the share price move.
The most recent dividend was actually lower than it was in the past, so that may have sent the share price lower.
The company's revenue and earnings (over time) are depicted in the image below (click to see the exact numbers).
Telefónica Deutschland Holding is a well known stock, with plenty of analyst coverage, suggesting some visibility into future growth. If you are thinking of buying or selling Telefónica Deutschland Holding stock, you should check out this free report showing analyst consensus estimates for future profits.
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. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. As it happens, Telefónica Deutschland Holding's TSR for the last 5 years was 7.0%, 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
It's good to see that Telefónica Deutschland Holding has rewarded shareholders with a total shareholder return of 14% in the last twelve months. That's including the dividend. That's better than the annualised return of 1.4% over half a decade, implying that the company is doing better recently. 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 for instance, the ever-present spectre of investment risk. We've identified 1 warning sign with Telefónica Deutschland Holding , and understanding them should be part of your investment process.