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While it may not be enough for some shareholders, we think it is good to see the WashTec AG (ETR:WSU) share price up 20% in a single quarter. But if you look at the last five years the returns have not been good. In fact, the share price is down 46%, 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.
See our latest analysis for WashTec
To quote Buffett, 'Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace...' One imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.
During the five years over which the share price declined, WashTec's earnings per share (EPS) dropped by 2.3% each year. Readers should note that the share price has fallen faster than the EPS, at a rate of 12% per year, over the period. So it seems the market was too confident about the business, in the past.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that WashTec has improved its bottom line lately, but is it going to grow revenue? This free report showing analyst revenue forecasts should help you figure out if the EPS growth can be sustained.
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, WashTec's TSR for the last 5 years was -35%, which exceeds the share price return mentioned earlier. This is largely a result of its dividend payments!
A Different Perspective
WashTec provided a TSR of 3.2% over the last twelve months. Unfortunately this falls short of the market return. On the bright side, that's still a gain, and it is certainly better than the yearly loss of about 6% endured over half a decade. It could well be that the business is stabilizing. 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've discovered 2 warning signs for WashTec that you should be aware of before investing here.