Investing in Telekom Austria (VIE:TKA) five years ago would have delivered you a 130% gain

The main point of investing for the long term is to make money. Better yet, you'd like to see the share price move up more than the market average. But Telekom Austria AG (VIE:TKA) has fallen short of that second goal, with a share price rise of 61% over five years, which is below the market return. Looking at the last year alone, the stock is up 15%.

Let's take a look at the underlying fundamentals over the longer term, and see if they've been consistent with shareholders returns.

See our latest analysis for Telekom Austria

There is no denying that markets are sometimes efficient, but prices do not always reflect underlying business performance. 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.

During five years of share price growth, Telekom Austria achieved compound earnings per share (EPS) growth of 14% per year. This EPS growth is higher than the 10% average annual increase in the share price. So one could conclude that the broader market has become more cautious towards the stock. This cautious sentiment is reflected in its (fairly low) P/E ratio of 9.26.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Before buying or selling a stock, we always recommend a close examination of historic growth trends, available here.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. Whereas the share price return only reflects the change in the share price, the TSR includes the value of dividends (assuming they were reinvested) and the benefit of any discounted capital raising or spin-off. So for companies that pay a generous dividend, the TSR is often a lot higher than the share price return. In the case of Telekom Austria, it has a TSR of 130% 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

Telekom Austria shareholders are up 19% for the year (even including dividends). But that return falls short of the market. The silver lining is that the gain was actually better than the average annual return of 18% per year over five year. This suggests the company might be improving over time. Before forming an opinion on Telekom Austria you might want to consider the cold hard cash it pays as a dividend. This free chart tracks its dividend over time.

But note: Telekom Austria may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

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

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.