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The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But on the bright side, if you buy shares in a high quality company at the right price, you can gain well over 100%. For instance, the price of RATIONAL Aktiengesellschaft (ETR:RAA) stock is up an impressive 181% over the last five years. It's also good to see the share price up 22% over the last quarter. But this move may well have been assisted by the reasonably buoyant market (up 12% in 90 days).
View our latest analysis for RATIONAL
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 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.
Over half a decade, RATIONAL managed to grow its earnings per share at 10% a year. This EPS growth is slower than the share price growth of 23% per year, over the same period. So it's fair to assume the market has a higher opinion of the business than it did five years ago. And that's hardly shocking given the track record of growth. This favorable sentiment is reflected in its (fairly optimistic) P/E ratio of 48.30.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
We know that RATIONAL has improved its bottom line lately, but is it going to grow revenue? Check if analysts think RATIONAL will grow revenue in the future.
What About Dividends?
As well as measuring the share price return, investors should also consider the total shareholder return (TSR). The TSR incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. We note that for RATIONAL the TSR over the last 5 years was 211%, which is better than the share price return mentioned above. The dividends paid by the company have thusly boosted the total shareholder return.
A Different Perspective
It's nice to see that RATIONAL shareholders have received a total shareholder return of 32% over the last year. Of course, that includes the dividend. That's better than the annualised return of 25% over half a decade, implying that the company is doing better recently. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. Is RATIONAL cheap compared to other companies? These 3 valuation measures might help you decide.