Investors in Knorr-Bremse (ETR:KBX) have seen decent returns of 41% over the past year

Passive investing in index funds can generate returns that roughly match the overall market. But you can significantly boost your returns by picking above-average stocks. To wit, the Knorr-Bremse AG (ETR:KBX) share price is 38% higher than it was a year ago, much better than the market return of around 14% (not including dividends) in the same period. That's a solid performance by our standards! In contrast, the longer term returns are negative, since the share price is 11% lower than it was three years ago.

So let's assess the underlying fundamentals over the last 1 year and see if they've moved in lock-step with shareholder returns.

Check out our latest analysis for Knorr-Bremse

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 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 the last year Knorr-Bremse grew its earnings per share (EPS) by 18%. This EPS growth is significantly lower than the 38% increase in the share price. This indicates that the market is now more optimistic about the stock.

The company's earnings per share (over time) is depicted in the image below (click to see the exact numbers).

We know that Knorr-Bremse has improved its bottom line lately, but is it going to grow revenue? You could check out this free report showing analyst revenue forecasts.

What About Dividends?

It is important to consider the total shareholder return, as well as the share price return, for any given stock. 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. As it happens, Knorr-Bremse's TSR for the last 1 year was 41%, which exceeds the share price return mentioned earlier. And there's no prize for guessing that the dividend payments largely explain the divergence!

A Different Perspective

It's good to see that Knorr-Bremse has rewarded shareholders with a total shareholder return of 41% in the last twelve months. Of course, that includes the dividend. Since the one-year TSR is better than the five-year TSR (the latter coming in at 1.2% 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. 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. Even so, be aware that Knorr-Bremse is showing 1 warning sign in our investment analysis , you should know about...

Of course, you might find a fantastic investment by looking elsewhere. So take a peek at this free list of companies we expect will grow earnings.

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