Flughafen Zürich (VTX:FHZN) shareholders have earned a 16% CAGR over the last five years

When we invest, we're generally looking for stocks that outperform the market average. Buying under-rated businesses is one path to excess returns. For example, long term Flughafen Zürich AG (VTX:FHZN) shareholders have enjoyed a 98% share price rise over the last half decade, well in excess of the market return of around 12% (not including dividends). However, more recent returns haven't been as impressive as that, with the stock returning just 19% in the last year, including dividends.

So let's assess the underlying fundamentals over the last 5 years and see if they've moved in lock-step with shareholder returns.

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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 the last half decade, Flughafen Zürich became profitable. That would generally be considered a positive, so we'd hope to see the share price to rise.

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 Flughafen Zürich has grown profits over the years, but the future is more important for shareholders. You can see how its balance sheet has strengthened (or weakened) over time in this free interactive graphic.

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 Flughafen Zürich the TSR over the last 5 years was 113%, which is better than the share price return mentioned above. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Flughafen Zürich has rewarded shareholders with a total shareholder return of 19% in the last twelve months. And that does include the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 16% per year), it would seem that the stock's performance has improved in recent times. Someone with an optimistic perspective could view the recent improvement in TSR as indicating that the business itself is getting better with time. 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. Take risks, for example - Flughafen Zürich has 1 warning sign we think you should be aware of.

But note: Flughafen Zürich 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 Swiss 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.