The worst result, after buying shares in a company (assuming no leverage), would be if you lose all the money you put in. But when you pick a company that is really flourishing, you can make more than 100%. For instance the KSB SE & Co. KGaA (ETR:KSB) share price is 141% higher than it was three years ago. That sort of return is as solid as granite. Also pleasing for shareholders was the 20% gain in the last three months.
Since the long term performance has been good but there's been a recent pullback of 5.2%, let's check if the fundamentals match the share price.
View our latest analysis for KSB SE KGaA
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.
KSB SE KGaA was able to grow its EPS at 34% per year over three years, sending the share price higher. This EPS growth is remarkably close to the 34% average annual increase in the share price. This suggests that sentiment and expectations have not changed drastically. Au contraire, the share price change has arguably mimicked the EPS growth.
The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).
It is of course excellent to see how KSB SE KGaA has grown profits over the years, but the future is more important for shareholders. Take a more thorough look at KSB SE KGaA's financial health with this free report on its balance sheet.
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. It's fair to say that the TSR gives a more complete picture for stocks that pay a dividend. We note that for KSB SE KGaA the TSR over the last 3 years was 160%, which is better than the share price return mentioned above. This is largely a result of its dividend payments!
A Different Perspective
It's good to see that KSB SE KGaA has rewarded shareholders with a total shareholder return of 24% in the last twelve months. That's including the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 10% per year), it would seem that the stock's performance has improved in recent times. Given the share price momentum remains strong, it might be worth taking a closer look at the stock, lest you miss an opportunity. 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 KSB SE KGaA (1 is a bit unpleasant!) that you should be aware of before investing here.