Does Beiersdorf's (ETR:BEI) Share Price Gain of 40% Match Its Business Performance?

Stock pickers are generally looking for stocks that will outperform the broader market. Buying under-rated businesses is one path to excess returns. For example, long term Beiersdorf Aktiengesellschaft (ETR:BEI) shareholders have enjoyed a 40% share price rise over the last half decade, well in excess of the market return of around 5.4% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 17% in the last year , including dividends .

Check out our latest analysis for Beiersdorf

While the efficient markets hypothesis continues to be taught by some, it has been proven that markets are over-reactive dynamic systems, and investors are not always rational. 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, Beiersdorf achieved compound earnings per share (EPS) growth of 5.8% per year. This EPS growth is reasonably close to the 6.9% average annual increase in the share price. That suggests that the market sentiment around the company hasn't changed much over that time. Indeed, it would appear the share price is reacting to the EPS.

You can see below how EPS has changed over time (discover the exact values by clicking on the image).

Dive deeper into Beiersdorf's key metrics by checking this interactive graph of Beiersdorf's earnings, revenue and cash flow.

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 incorporates the value of any spin-offs or discounted capital raisings, along with any dividends, based on the assumption that the dividends are reinvested. Arguably, the TSR gives a more comprehensive picture of the return generated by a stock. In the case of Beiersdorf, it has a TSR of 45% for the last 5 years. That exceeds its share price return that we previously mentioned. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

Beiersdorf's TSR for the year was broadly in line with the market average, at 17%. That gain looks pretty satisfying, and it is even better than the five-year TSR of 7.8% per year. It is possible that management foresight will bring growth well into the future, even if the share price slows down. Is Beiersdorf cheap compared to other companies? These 3 valuation measures might help you decide.

Of course Beiersdorf may not be the best stock to buy. So you may wish to see this free collection of growth stocks.

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on DE exchanges.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.