FRIWO (ETR:CEA) Shareholders Booked A 31% Gain In The Last Five Years

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, the FRIWO AG (ETR:CEA) share price is up 31% in the last 5 years, clearly besting the market return of around 6.1% (ignoring dividends). On the other hand, the more recent gains haven't been so impressive, with shareholders gaining just 2.9%.

See our latest analysis for FRIWO

While markets are a powerful pricing mechanism, share prices reflect investor sentiment, not just underlying business performance. 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).

FRIWO's earnings per share are down 44% per year, despite strong share price performance over five years.

This means it's unlikely the market is judging the company based on earnings growth. Since the change in EPS doesn't seem to correlate with the change in share price, it's worth taking a look at other metrics.

It is not great to see that revenue has dropped by 8.2% per year over five years. It certainly surprises us that the share price is up, but perhaps a closer examination of the data will yield answers.

You can see below how earnings and revenue have changed over time (discover the exact values by clicking on the image).

Take a more thorough look at FRIWO's financial health with this free report on its balance sheet.

What about the Total Shareholder Return (TSR)?

We'd be remiss not to mention the difference between FRIWO's total shareholder return (TSR) and its share price return. The TSR attempts to capture the value of dividends (as if they were reinvested) as well as any spin-offs or discounted capital raisings offered to shareholders. Dividends have been really beneficial for FRIWO shareholders, and that cash payout contributed to why its TSR of 38%, over the last 5 years, is better than the share price return.

A Different Perspective

FRIWO shareholders are up 2.9% for the year. But that was short of the market average. It's probably a good sign that the company has an even better long term track record, having provided shareholders with an annual TSR of 7% over five years. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. To that end, you should learn about the 3 warning signs we've spotted with FRIWO (including 2 which is don't sit too well with us) .

But note: FRIWO 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 DE exchanges.

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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. 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.
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