Klöckner & Co's (ETR:KCO) three-year earnings growth trails the respectable shareholder returns

By
Simply Wall St
Published
January 14, 2022
XTRA:KCO
Source: Shutterstock

One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, the Klöckner & Co SE (ETR:KCO) share price is up 79% in the last three years, clearly besting the market return of around 38% (not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 42%.

After a strong gain in the past week, it's worth seeing if longer term returns have been driven by improving fundamentals.

See our latest analysis for Klöckner & Co

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 imperfect but simple way to consider how the market perception of a company has shifted is to compare the change in the earnings per share (EPS) with the share price movement.

During three years of share price growth, Klöckner & Co moved from a loss to profitability. So we would expect a higher share price over the period.

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

earnings-per-share-growth
XTRA:KCO Earnings Per Share Growth January 14th 2022

It is of course excellent to see how Klöckner & Co 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 the Total Shareholder Return (TSR)?

Investors should note that there's a difference between Klöckner & Co's total shareholder return (TSR) and its share price change, which we've covered above. Arguably the TSR is a more complete return calculation because it accounts for the value of dividends (as if they were reinvested), along with the hypothetical value of any discounted capital that have been offered to shareholders. Its history of dividend payouts mean that Klöckner & Co's TSR of 89% over the last 3 years is better than the share price return.

A Different Perspective

We're pleased to report that Klöckner & Co shareholders have received a total shareholder return of 42% over one year. Since the one-year TSR is better than the five-year TSR (the latter coming in at 0.8% per year), it would seem that the stock's performance has improved in recent times. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand Klöckner & Co better, we need to consider many other factors. Take risks, for example - Klöckner & Co has 2 warning signs we think you should be aware of.

For those who like to find winning investments this free list of growing companies with recent insider purchasing, could be just the ticket.

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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